T-Bills take-up high but lower than Q2

Treasury bill auctions recorded an oversubscription between July and September, thanks to improved liquidity.

During the third quarter, the average subscription rate stood at 133.3 per cent. However, this was lower than the previous quarter that was at 162.7 per cent.

Yields on all the three tenors declined by 28 basis points (bps), 110 bps and 100 bps during the period, closing at 7.7 per cent, 9.1 per cent and 10 per cent respectively.

Market analysts attributed this to the Central Bank of Kenya (CBK) efforts to keep rates low by rejecting expensive bids.

Yield on 91-day tenor continued to trade below its five-year average of nine per cent, closing at 7.7 per cent.

The below average yield on the 91-day tenor is mainly attributed to the low-interest rate environment the country has been experiencing.

“We expect this to continue in the short-term because the rate cap is still in place which will make it easier for the government to borrow from the domestic market, as institutions will continue channelling funds more actively towards government securities, which are deemed less risky, since the pricing of loans to the private sector is based on the Central Bank Rate as opposed to their risk profiles,” said analysts at Cytonn Investments.

During last week’s auction, subscription slowed down due to a tighter liquidity condition mainly attributed to the end-month cyclical factors — corporates remitting statutory tax obligations coupled with payments for salaries and suppliers.

The Central Bank only managed to raise a total of Sh20.61 billion from investors against an offer of Sh24 billion.

This represented an overall performance rate of 85.88 per cent.