Investors flock to longer-tenor bills amid improved liquidity

Investors paid reduced attention to the 91-day tenor during the weekly Treasury bills auction even as liquidity in the money market improved.

The liquidity condition was supported by increased government payments coupled with maturities of the discounted securities. The 91-day tenor posted a 64 per cent performance rate from the 289.60 per cent recorded the previous week. The tenor only managed to attract Sh2.55 billion worth of bids against a Central Bank of Kenya (CBK) offer of Sh4 billion.

“We have thus seen banks, major players in the Treasury bill market, opting to pack their excess liquidity with the CBK via repo which have attractive rates as opposed to the 91-day tenor,” said Churchill Ogutu, a macro-economic and fixed income analyst at Investment Bank, Genghis Capital.

Overall, analysts termed the weekly performance healthy although the cumulative net domestic borrowing at Sh53.85 billion lags the pro-rated Treasury target. Data from the CBK showed the weekly uptake was boosted by the 182-day and 364-day tenors , which registered a performance rate of 126.16 per cent and 205.13 per cent respectively.

In total, the Treasury bills subscription came in at a rate of 148.70 per cent. The auction had received bids totalling Sh35.68 billion against an offer of Sh24 billion, with the CBK accepting Sh27.39 billion.

This was however, lower than the previous week when it recorded the highest uptake in six weekly auctions at a rate of 176.14 per cent. This week, analysts expect the performance to be largely determined by liquidity flows coupled with the announcement of this month’s bond, which could be a longer-term maturity in line with Treasury’s debt management strategy.