Kenyan Treasury bills were massively undersubscribed raising Ksh 14.3 billion for 91-day, 182-day, and 364-days against the Ksh 24 billion weekly target.
The Central bank of Kenya said this represented a performance of 59.5 percent up from 35.6% the previous week, attributable to tightened liquidity in the money markets.
“Interest rates on the 91-day and 182-day Treasury bills decreased, while that on the 364-day Treasury bill increased marginally,” the regulator said in its weekly bulletin.
The results of today’s Treasury bill auction. The full results can be found at https://t.co/enV7R4ZL7V pic.twitter.com/OWZq2f5GbE
— Central Bank of Kenya (@CBKKenya) April 16, 2020
In the previous auction, the treasury raised Ksh 8.47 billion.
Liquidity
During the week, liquidity tightened in the money markets with the average interbank rate increasing to 5.9%, from 5.3% recorded the previous week, attributable to banks trading cautiously in the interbank market in order to meet their Cash Reserve Requirement (CRR) cycle ending 15th April 2020.
According to Market Analysts, as risk aversion increases amidst mounting uncertainty, preference for short term investments may increase materially.
“No doubt, subscription for government securities will remain sound as alternative investment options narrows,” Stephanie Kimani and Faith Atiti from NCBA noted in their Weekly Fixed Income Report – 15th April 2020.
They further add that “Moreover, as banks’ liquidity requirements evolve with the ongoing loan restructurings, prudence may see increased shifts towards cash and cash equivalents. This may reduce demand for longer-term government papers from banks which hold about 55% of domestic debt. This may also compel the government to offer more appealing tenors for financial institutions depending on the urgency of spending needs.”
