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Capital Markets

T-bills uptake rises but yields fall

Central Bank of Kenya
The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG 

Yield on three- and six-month government securities fell marginally while that on one-year paper remained steady during last Thursday’s auction as Treasury bills were oversubscribed for the first time since the last week of April.

The Central Bank of Kenya (CBK), government’s fiscal agent, received bids worth Sh31.53 billion for three-, six- and 12-month securities it offered for sale against a target of Sh24 billion.

This represented a 131.39 percent subscription to T-bills compared with 92.03 percent the previous week.

CBK accepted bids amounting to Sh28.98 billion and rejected expensive ones worth slightly more than Sh2.55 billion.

The increased appetite for short-term government debt by cash-rich firms, especially banks, reflects improved liquidity in the market following the end of quarterly corporate tax payments window which peaks from April 20.

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Average interest rate for 91-day papers fell to 7.085 percent from 7.160 last week, 182-day declined to 7.738 percent from 7.814 percent while the yield for 364-day securities steadied at 9.312 percent.

Firms, including banks, largely use T-bills auctions as cash management instruments besides generating returns.

“The biggest investors in Treasury bills (banks) don’t have a choice,” Kenneth Minjire, head of fixed-income securities at investment banker Genghis Capital, said.

“There are no short-term papers in the secondary market and you are not lending (businesses and households), so the only option is government securities. You will rather be earning seven percent on depositor’s money than earning zero.”

Most of investors showed interest in one-year papers whose subscription hit 210.53 percent or Sh21.05 billion in bids against Sh10 billion on sale, with the CBK snapping up Sh18.49 billion of the bids.

Subscription for the 91-day T-bills stood at 146.11 percent of Sh4 billion on offer, an equivalent of Sh5.84 billion bids which were all accepted by the CBK.

The 182-day T-bills were, however, subscribed 46.37 percent, with bids amounting to Sh4.64 billion against Sh10 billion offered.

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