Heavy domestic debt maturities have further cut the stock of outstanding Treasury bills, which now account for 34.2 percent of total domestic debt compared to 36.7 percent at the beginning of May.
Central Bank of Kenya data shows the T-bill stock stood at Sh954.25 billion at the end of June, down Sh49.3 billion from the all-time high stock of Sh1.003 trillion at the beginning of May. In the month of June, the stock of T-bills went down by Sh11.3 billion.
While investors have been bidding heavily in the weekly auctions in recent weeks, especially for the one-year T-bill, the CBK has been content to reject expensive offers and settle for little more than the amounts required to roll over maturing debt.
This has in turn pushed the yields on offer in these debt issues lower.
In July, the situation is likely to persist, with heavy T-bill maturities coming at a time when the Treasury is yet to fully roll out the fiscal year’s spending.
Debt analysis by Commercial Bank of Africa shows that July domestic debt maturities are expected to hit Sh133 billion.
“The downward pressure on the yield curve continues to reflect tame inflation expectations as well as sustained heavy liquidity conditions in the market,” said CBA in a treasury note.
“A well-funded market, has enhanced the stampede to government securities at a time when private sector credit growth remains debilitated.”
In June, appetite for new borrowing from the domestic market was dampened by the large inflow of foreign debt from the Eurobond issued in mid-May that raised Sh210 billion.
Total domestic debt did not go down with the stock of T-bills, however, as the government upped its use of the overdraft facility at the CBK. The overdraft rose from Sh35.97 billion at the end of May to Sh57.33 billion at the end of June. Other domestic debt includes advances from commercial banks that fell during the period.