T-Bills Seem To Be Beating Njaanuary With An Oversubscription
Jan. 20, 2020
Last week, T-bills remained oversubscribed, with the subscription rate coming in at 118.1 percent down from 178.3 percent recorded the previous week and lower than the YTD average of 124.9 percent.
The oversubscription of the T-Bills is partly attributable to improved liquidity in the market during the week as evidenced by the decline in the average interbank rate to 3.8 percent from 4.8 percent recorded the previous week, supported by government payments and debt maturities.
“We note that the 364-day paper continued to receive the most interest from investors, having recorded the highest subscription rate of the 3 papers, at 169.9 percent,” said analysts from Cytonn Investments in their weekly report.
This is attributable to the market currently pricing that the government will be under pressure to meet its domestic target and as such a bias to shorter-dated papers in order to avoid duration risk, which has seen most investors still keen on the primary fixed income market, finding the 364-day T-bill more attractive on a risk-adjusted return basis.
The yields on the 91-day, 182-day, and 364-day papers increased by 3.2 bps, 2.5 bps, and 0.9 bps to 7.2, 8.2, and 9.8 percent respectively.
The acceptance rate declined to 80.1 percent from 92.1 percent recorded the previous week, with the government accepting 22.7 billion shillings of the 28.4 billion shillings worth of bids received.
Last week, the Kenyan Government reopened two bonds namely, FXD1/2019/5 and FXD1/2019/10 with an effective tenor of 4.1 and 9.1 years, respectively, and coupon rates of 11.3 and 12.4 percent respectively.
The two bonds were raised in a bid to raise 50.0 billion shillings for budgetary purposes. “We expect the FXD1/2019/5 to attract more interest due to its relatively shorter tenor thus reduced duration risk, coupled with the high liquidity in the market,” said Cytonn.
Cytonn says that they expect the weighted average of accepted bids to come in at 11.3 – 11.5 percent for the FXD1/2019/5 and 12.1 – 12.3 percent for the FXD1/2019/10, given that they are currently trading at 11.3 percent and 12.1 percent on the yield curve, respectively.