T-Bills Oversubscribed Last Week as Government Acceptance Rate Declines
Last week, T-bills were oversubscribed with the subscription rate coming in at 259.5 percent up from 210.5 percent the previous week according to a report released by Cytonn Investments.
The subscription rates for the 91, 182 and 364-day papers came in at 137.9, 221.6, and 345.9 percent compared to 21.9, 173.5, and 322.9 percent respectively the previous week.
Subscription picked up for the 91 and 182-day papers as investors keep short before the start of the next borrowing cycle where the government will once again be behind borrowing target.
Yields on the 91- day, 182-day and 364-day papers declined by 10 bps, 30 bps and 20 bps to 7.8, 9.8 and 10.7 percent from 7.9, 10.1 and 10.9 percent respectively the previous week.
The acceptance rate for T-bills declined to 29.5 percent from 40.5 percent the previous week, with the government accepting a total of 18.3 billion shillings of the 62.3 billion shillings worth of bids received, against the 24.0 billion shillings on offer.
The acceptance rate continued to decline due to the government cutting down on local borrowing since it is currently 32.9 percent ahead of its pro-rated domestic borrowing target for the current fiscal year, having borrowed 380.2 billion shillings against a target of 286.2 billion shillings.
For the month of June 2018, the Kenyan Government has issued a new 25-year Treasury bond (FXD 1/2018/25) with the coupon set at 13.4 percent in a bid to raise 40.0 billion shillings for budgetary support.
The issuance of the long tenor bond has been attributed to efforts by the Government to lengthen the maturity profile of local currency denominated debt as the average duration of total domestic government securities stood at 4.2 years as at April.
Given that the government is currently 32.9 ahead of its pro-rated domestic borrowing target for the current fiscal year, and has collected 79.1 percent of its total foreign borrowing target, “we don’t expect the government to come under pressure to borrow.”
“We also don’t expect upward pressure on interest rates during the same period due to the decision by the monetary policy committee to retain the CBR at 9.5 percent in May 2018. As such, we expect the average yield for the new bond issue to come in between 13.4 percent and 13.7 percent,” said Cytonn Investments.