Capital Markets

Treasury bills underperform in August as investors turn to longer-dated tenors

Central Bank of Kenya in Nairobi. file photo | nmg
Central Bank of Kenya in Nairobi. file photo | nmg 

Treasury bills took a nosedive in August as investor interest turned towards longer-dated tenors. The average subscription rate was recorded at 85.1 per cent, a drop from 157.4 per cent in July.

Consequently, the average Treasury bills acceptance rate improved to 90.3 per cent from 74.4 per cent in July as the Central Bank of Kenya (CBK) accepted a total of Sh73.8 billion of the Sh81.7 billion bids received.

This indicated that bids were largely within the range the CBK deemed acceptable.

During the previous weekly auction, the tenors recorded the highest uptake in six auctions at a rate of 176.14 per cent, attributed to improved liquidity in the money market.

“The government securities market performed well during the week ending August 31 with the Treasury bills auction achieving a subscription rate of 176.14 per cent compared to 120.35 per cent in the previous week,” said the CBK in a statistical bulletin. The auction received bids totaling Sh42.3 billion against an offer of Sh24 billion.

Analysts yesterday said the performance was boosted by the 91-day and 364-day tenors that registered performance rates of 289.60 per cent and 216.93 per cent respectively.

“We expect improved liquidity to sustain Treasury bills uptake,” said analysts at investment bank Genghis Capital in a note to investors. Yields fell 3.3 basis points (bps) and 3.5 bps in the 182-day and 364-day tenors, respectively, and increased 4.4 bps in the 91-day tenor.

Analysts say a combination of improved liquidity and uncertainty over the proposed amendment of the law capping interest rates will sustain demand for Treasury bills.