Treasury raises Sh28 billion in T-bill auction

What you need to know:

The Treasury bagged Sh4 billion more than initially planned due to oversubscription.
The subscriptions also came at low yields that the Central Bank of Kenya, acting on behalf of the Treasury, has been giving preference to in recent months.

The Treasury raised Sh28.1 billion in last week’s T-bill auction after its latest offers were oversubscribed.

Investors put in bids amounting to Sh33.2 billion against an offer of Sh24 billion as liquidity in the money market improved. That means the government raised Sh4 billion more than initially planned.

The subscriptions also came at low yields that the Central Bank of Kenya, acting on behalf of the Treasury, has been giving preference to in recent months.

“The improved liquidity environment manifested itself in this week’s T-Bill auction with an oversubscription of 138 per cent. The CBK received bids worth Sh33 billion against an offer of Sh24 billion,” said Genghis Capital in its report of the auction.

The market weighted average interest rate for the 91-day paper was 8.005 per cent, which was the same level as that for the bids that were accepted.

It also reflects virtually no change from the rate accepted in the previous auction. However, in some of the auctions the rate has been coming down. For the 182-day paper, the market weighted average interest rate stood at 10.47 per cent but the accepted yield was 10.438 per cent.

READ: Excess bond cash lifts the T-bill uptake

In this case the rate came down slightly. The one-year or 364-day T-bill attracted the highest excess subscription of Sh14.5 billion compared to the offer of Sh10 billion and achieved a market average rate of 11.174 per cent with the rate accepted standing at 11.156 per cent – lower than in the previous auction.

Analysts said that the accepted yields indicated that the T-bill auctions were on a downward trend just as is the direction of the yield curve, which shows the yields that various fixed-income instruments are giving.

“The rates although remaining range bound at eight per cent, 10.4 per cent and 11.10 per cent on the 91-day, 182-day and 364-day respectively, have taken on a downward trend following the direction taken by the medium and short term portion of the yield curve,” said Genghis Capital.