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T-bills maintain high subscription into fifth week

Monday April 15 2019

Central Bank of Kenya

Central Bank of Kenya. FILE PHOTO | NMG 

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Treasury bills were oversubscribed by nearly half last Thursday as investors continued to offer the government more cash than it was seeking for the fifth straight week due to high liquidity.

Central Bank of Kenya (CBK), the government’s fiscal agent, received bids worth Sh35.55 billion, 48.13 percent more than the Sh24 billion on offer for three-, six- and 12-month debt securities.

The high appetite for government debt points to high liquidity levels in the market and inadequate supply of short-term debt securities, dealers said. “Especially for short-term buyers, they don’t have options because CBK hasn’t been issuing short-term papers (for the primary market),” said Kenneth Minjire, head of fixed-income securities at fund manager Genghis Capital.

“In the secondary market there is also a shortage because there are few investors willing to sell a short-term bond (two-five years) because the investment risk is very high: you sell, you have nothing to buy” he said.

The scramble for T-bills — instruments the government uses to borrow cash for between three to 12 months — has been more pronounced on the 364-day paper than the 91- and 182-day debt securities.

The one-year paper was subscribed 230 percent during last week’s auction after bids amounted to Sh23 billion against Sh10 billion offered by the CBK, representing a sustained oversubscription since auction on February 28. Subscription to three-month paper was 122.67 percent while that for 182-day T-bills was 76.42 percent.


The CBK procured 364-, 182- and 91-day papers for a return of 7.397, 8.090 and 9.371 percent, respectively, lower than 7.444, 8.189 and 9.385 percent during the previous auction.

Firms, including banks, largely use T-bills auctions as cash management instruments besides generating returns.

High liquidity was equally reflected in the interbank market where mostly smaller banks borrow from each other overnight to manage withdrawals and payments requests from clients.

The interbank rate fell to 1.620 percent last Thursday from 3.556 percent a week earlier, CBK data showed.