T-bills February uptake high on liquid market

High market liquidity has raised demand for Treasury Bills, with investor bids outstripping the accepted amounts amid low redemptions, data from the Central Bank of Kenya shows.

In February, the government accepted a total of Sh139 billion from five auctions, yet investors put in a total of Sh236 billion in the same month.

This means it accepted only about 58.9 per cent of the total amount that it received in bids within the period.

In the latest auction of the Treasury bills last week, the CBK – as the fiscal agent of the Treasury – accepted Sh15 billion out of a whopping Sh54.4 billion it received which amount to only about 27.6 per cent of the total amount. That is the smallest proportion accepted this month.

Analysts say this is an indication that the Treasury is not under any pressure to accept expensive bids, given its needs and the limited amount of maturities for the month. In the latest auction, the redemptions amounted to about Sh12 billion, so the Treasury’s new borrowing was only Sh3 billion.

“What explains the high mounts in the bids but low accepted amounts is the fact that the market is liquid and the Treasury has indicated – under the Medium-term Debt Management Strategy – that it will use more of bonds than T-bills,” said Edwin Chui, head of research at Dyer and Blair Investment Bank.

Mr Chui noted that the Treasury’s drive for more T-bonds comes against the trend where the proportion of borrowing through T-bills has risen in the past two years, which in effect has meant that the government has to frequently ensure that it raises cash to redeem the bills within the short period they mature.

In the latest auction, the rate for the various bills has fallen marginally with the 91-day paper at 7.315 per cent against last week’s level of 7.319 per cent, the 182-day paper at 8.235 per cent against 8.258 per cent and the 364-day issue at 9.5 per cent compared to last week’s 9.799 per cent.

Treasury data as at end of January showed that it had taken up 77.8 percent of its full year net domestic borrowing target of Sh391.45 billion, meaning it is under no pressure to take up expensive money from investors.