T-bills undersubscribed for fourth sale in a row on low liquidity

Central Bank of Kenya. FILE PHOTO | NMG

By ELIZABETH KIVUVA
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Summary

• The Central Bank of Kenya (CBK) — the government’s fiscal agent— said last week’s auction attracted bids worth Sh21.7 billion, with the government taking up nearly the entire amount at Sh21.34 billion.
• The auction for the 91,182 and 364-day papers targeted Sh24 billion.
• New borrowing for the week amounted to Sh3.16 billion, given that there were redemptions worth Sh18.18 billion that were due on the short term securities.

The Treasury bills auction was undersubscribed for the fourth sale in a row last week due to low liquidity in the market ahead of the festive season.

The Central Bank of Kenya (CBK) — the government’s fiscal agent— said last week’s auction attracted bids worth Sh21.7 billion, with the government taking up nearly the entire amount at Sh21.34 billion. The auction for the 91,182 and 364-day papers targeted Sh24 billion.

New borrowing for the week amounted to Sh3.16 billion, given that there were redemptions worth Sh18.18 billion that were due on the short term securities.

The undersubscription was despite the continuing rise in yields on the papers, by an average of 2.9 basis points to 6.916 per cent, 7.399 per cent and 8.283 per cent respectively for the three, six and 12-month tranches.

In the previous three sales, investors raised bids worth Sh9.9 billion, Sh10.9 billion and Sh15.4 billion respectively, which was also a pointer to a preference for longer sated bonds that have significantly higher yields, even when accounting for the duration aspect.

The low subscription has also been attributed to the tightening liquidity towards the end of the year due to demand for cash by both public and private sector, and increase in activities by CBK in the repo market to stabilise shilling.

The CBK took up Sh140.4 billion in excess liquidity from banks between November 2 to December 14 in the move to ensure the shilling remains stable, Sterling Capital said in a fixed income note. The T-bill sale also coincided with the tap sale for the two reopened 15-year Treasury bonds that were auctioned earlier this month.