The Kenyan Treasury experienced robust demand for its securities in FY2024. Treasury bills, particularly the short-term 91-day bills, were highly sought after by investors, reflecting a preference for minimizing interest rate risk.
This strong appetite resulted in significant oversubscription rates across all maturities.
T-Bill Market
During the year, T-bill auctions remained highly oversubscribed in FY2024, with an overall subscription rate of 153.3%, exceeding the previous year’s 120.0%.
The 91-day T-bill witnessed the strongest investor demand (399.7% oversubscription) as investors sought to minimize duration risk. This was slightly lower than the preceding year’s 529.1%.
The 364-day and 182-day T-bills also saw increased investor participation with subscription rates of 103.0% and 104.9%, respectively, compared to 29.0% and 48.5% in FY2023.
Yield Rise
Average yields across all maturities increased significantly. The 182-day witnessed the sharpest rise (330.6 bps) to 15.7%, followed by the 364-day (327.1 bps) at 16.0% and the 91-day (300.6 bps) at 15.2%.
On a year-on-year basis, yields on all government papers declined significantly in 2024. The 91-day experienced the largest decrease (6.0%) to 9.9%, followed by the 182-day (5.9%) at 10.0% and the 364-day (4.5%) at 11.4%.
This decline is primarily attributed to eased inflation, currency appreciation, improved liquidity, and a perceived reduction in risk.
The average acceptance rate was 77.3% in FY2024, lower than the 92.5% recorded in FY2023.
The decline in yields accelerated in December 2024, particularly for the 91-day T-bill (274.3 bps), compared to November (190.8 bps). This likely reflects government efforts to manage borrowing costs amidst budgetary pressures.
T-Bond Market
On the other hand, the primary T-bond auctions were consistently oversubscribed in 2024, with an overall subscription rate of 171.1% (higher than the 128.5% in 2023).
The government accepted 76.3% of bids received.
Looking ahead, the Treasury plans to tap the market further by reopening existing long-term bonds, offering investors an opportunity to participate in the sovereign debt market.
The government plans to raise Kshs 30.0 bn through the reopening of the fifteen-year (FXD1/2018/15) and twenty-five-year (FXD1/2022/25) fixed coupon bonds.
FXD1/2018/15: 8.3-year tenor, 12.7% fixed coupon rate, bidding range 13.45%-13.85%.
FXD1/2022/25: 22.8-year tenor, 14.2% fixed coupon rate, bidding range 15.65%-16.00%.
