Capital Markets

Treasury bills hit Sh1trn as debt tenor drops

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

Government borrowing via Treasury bills has piled up to a record Sh1 trillion defying Debt Management Office’s push to lengthen the maturity of its debt.

Fresh data from Central Bank of Kenya (CBK) shows that between the last week of December and the first week of this month, stock of T-bills has increased by Sh99.45 billion or 11 per cent.

The pace of growth is faster than the 9.5 per cent exhibited by Treasury bonds despite the falling yields. T-bills, excluding repos, now account for 37.22 per cent of Sh2.74 trillion domestic debt.

This defies the Treasury’s medium-term debt management strategy for financial years 2018/19 to 2020/21, which intended T-bills not to be above 20 per cent.

“Short-term debt issuances (T-bills) was limited to 20 per cent, whereas medium to long term maturities (five to 30 years T-bonds) was to account for 80 percent of total domestic government borrowing,” says the Treasury document.


However, as of May 3, the actual proportion for T-bills and bonds stood at 36.67 percent and 61.86 per cent respectively of the domestic debt.

This exposes the government to increased refinancing risk.

The stock of T-bills held by commercial banks increased by Sh110 billion last year as banks continued to pack excess liquidity in government paper at the expense of private sector lending.

As at end of 2017/18 financial year, the main refinancing risk was associated with high domestic debt repayments, at 37.7 per cent, falling due within the year largely comprised of T-bills, according to the Treasury.

The average time to maturity (ATtM) for domestic debt portfolio stood at 4.4 years by the end of February last year, down from a high of 8.4 years in 2011.

“The ATtM for external debt portfolio has been declining due to the growth of the short-tenor commercial debt proportion as a result of Kenya’s graduation to the lower middle-income country,” the Treasury said last year.

The 91-day T-bill rate for the first week of May was 7.25 per cent compared to 7.3 per cent in December last year.

That of 182-day and the 364-day Treasury bills also declined to 7.9 per cent and 9.32 per cent from 8.4 percent and 9.7 percent respectively.

The three papers had closed December 2017 at eight per cent, 10.5 percent and 11.1 percent, respectively.