The uptake of , 364-day paper, one-year Treasury bills continue to be a favourite for investors after the Central Bank of Kenya (CBK) cut the interest rate.
During the week, the 364-day paper was oversubscribed almost four times with the CBK receiving bids worth Sh39.77 billion in the latest issue against an advertised Sh10 billion.
“We note that the 364-day paper continued to receive the most interest from investors, having recorded the highest subscription rate of the 3 papers, at 311.6%,” said Cytonn Investments.
They attribute to the current market pricing that the government will be under pressure to meet its domestic target and as such a bias to shorter-dated papers in order to avoid duration risk. “Which has seen most investors still keen on the primary fixed income market, finding the 364-day T-bill more attractive on a risk-adjusted return basis.”
On the other hand, NCBA Bank Analysts are of the view that, “The divergence between the policy signals and the market’s response has been driven by public finance management concerns. Any further loss in investor confidence in the government’s ability to ensure fiscal sustainability may continue to attract a considerable premium on the sovereign. Whereas the fiscal deficit is expected to gradually narrow, it will remain fairly high, necessitating heavy borrowing in absolute terms.”
They project that in the five months to June 2020, the market will be furnished with Ksh 552.37 billion in government debt maturities and coupon payments which will support cash conditions further.
The yield on the 91-day, 182-day, and 364-day papers remained unchanged at 7.3%, 8.2% and 9.9%, respectively.
The acceptance rate rose to 53.6%, from 95.0% recorded the previous week, with the government accepting Kshs 28.0 billion of the Kshs 52.2 billion bids received.
