T-bills stock rise slashes debt repayment period

The CBK data shows T-bills now account for 37.5 per cent of government securities. FILE PHOTO | NMG 

By CHARLES MWANIKI

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Summary

• CBK data shows T-bills now account for 37.5 per cent of all government securities, up from 32.7 per cent a year ago, while the share of bonds has gone down from 64 per cent to 60.2 per cent in the period.
• In absolute terms, the stock of T-bills has grown by 32 per cent or Sh231 billion to Sh952 billion, while that of bonds has gone up by a more modest 8.3 per cent or Sh117 billion to Sh1.53 trillion.
• The growth in the stock of T-bills goes against the preferred strategy of long- and short-term domestic debt balancing.

The stock of outstanding government securities held in short term treasury bills has risen significantly in the past one year, putting refinancing pressure on the government that has been keen to lengthen the maturity profile of domestic debt.

Latest Central Bank of Kenya (CBK) data shows T-bills now account for 37.5 per cent of all government securities, up from 32.7 per cent a year ago, while the share of bonds has gone down from 64 per cent to 60.2 per cent in the period.

In absolute terms, the stock of T-bills has grown by 32 per cent or Sh231 billion to Sh952 billion, while that of bonds has gone up by a more modest 8.3 per cent or Sh117 billion to Sh1.53 trillion.

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The growth in the stock of T-bills goes against the preferred strategy of long- and short-term domestic debt balancing.

The Treasury’s medium term debt management strategy covering the 2018/19 to 2020/21 fiscal years calls for a reduction in the share of T-Bills in net domestic financing to around 13 per cent 2021.

“On the domestic front, the objective is to lengthen the maturity profile of domestic debt by reducing the share of T-bills in total net domestic financing ratio…this is aimed at reducing the refinancing risks associated with the short-term debt,” said the Treasury in the strategy report released earlier this year.

The shift towards T-bills reflects the recent trend in the primary market where investors have tended to prefer lending to government on the short term basis instead of the long-term bonds that have recently favoured by the Treasury as it looks to raise the maturity profile.

Recent auctions have seen oversubscriptions on the one-year T-bill, which last week attracted bids worth Sh16.7 billion against an offer of Sh10 billion.

Bonds issued this fiscal year on the other hand have raised just half of the intended amounts, thanks to a combination of investor apathy and rejection of costly bids by CBK.

The most recent, a Sh50 billion 20-year infrastructure bond that attracted bids worth Sh40.4 billion.