T-bill uptake declines after reopening of two bonds

Treasury bill subscription declined in last week’s auction as investors turned to the reopened bonds especially the five-year tenor.

Central Bank of Kenya (CBK) received Sh28.35 billion bids against the advertised Sh24 billion representing 118.13 percent subscription.

The uptake on the government short-term securities is a decline compared to Sh42.8 billion bids in the week ending January 9 that represented a performance of 178.3 percent.

“The decline in subscription has been mainly attributed to the ongoing primary bond sale, which has split the investing class. This (subdued T-bill subscription), usually plays out whenever a short-term bond, in this case five-year paper, is offered,” Mr Churchill Ogutu, a senior research analyst at Genghis Capital said.

The Treasury has reopened the 10-year and five-year bonds targeting Sh50 billion.

The reopening follows first issue in December for the a 10-year Sh50 billion bond where the Treasury only received Sh38.3 billion bids.

It then invited bids to a five-year Sh25 billion bond, as the first shortest bond issue for the 2019/20 fiscal year, that was oversubscribed at Sh28 billion.

“Investors have shown a preference for short-term bonds and we expect this issue’s tenor to attract high investor participation,” Renaldo D'Souza, head of Sterling Capital said of the Sh25 billion bond in December.

“Following the removal of interest rate caps, investors have adopted a “wait and see” approach in anticipation for a rise in yields.,” D'Souza added.

CBK is now curbing aggressive bidding of the 364-day T-bill, rejecting Sh5.6 billion bids and accepting bids matching the week's redemptions.