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Treasuries get 198pc subscription

Monday February 11 2019

Central Bank of Kenya

The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

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Treasury bills subscription continued to exceed government’s demand last week with the Central Bank of Kenya (CBK) receiving Sh47.58 billion against the Sh24 billion sought, translating to a performance rate of 198.26 percent. Of the bids received, CBK accepted just Sh28.92 billion.

This was the highest subscription in four weekly auctions, according to Genghis Capital records.

“The 364-day tenor remains the most appealing tenor on a risk-adjusted basis and has also been bolstered by excess market liquidity,” said Genghis in weekly wrap analysis.

The Treasury was seeking Sh4 billion from 91-day Treasury bill and Sh10 billion each from 182- and 364-day papers. Only the 91-day paper was under-subscribed, receiving Sh3.34 billion while the demand for 182- and 364-day papers hit 149.27 percent and 293.19 percent.

While Treasury absorbed all the bids from 91-day paper, it accepted Sh8.93 billion from 182-day paper and Sh16.64 billion from the 364-day T-bill to meet its liquidity needs.

Average interest rates were 7.04 percent, 8.56 percent and 9.64 per cent respectively, all being lower than the previous auction rates.

There is an upcoming auction on Thursday targeting another Sh24 billion from 91-day, 182-day and 364-day papers.

However, Genghis expects the market to be focused on the month’s primary bond issue which features a dual-tranche of 5-year and 10-year duration with a total value of Sh50 billion.

“We anticipate to see uptick in activity on the 7-year to 10-year of the curve as investors take up positions on declining yields,” says Genghis.

Further, the reach team expects cyclical liquidity tightness to kick in this week as corporates prepare to meet their statutory tax obligations and banks enter new cash reserve ratio cycle.

Last week, strong demand was also seen on 2-year and 15-year bonds, with Sanlam Investments East Africa linking it to strong liquidity position during the week. Investors bid for Sh66 billion for a 2-year and 15-year Treasury bonds compared to Sh12 billion that was offered.