Treasury bills undersubscribed on tight liquidity

Treasury bills subscription eased slightly in Thursday’s weekly auction with an overall performance of 90.9% compared to 78.2% the previous week.

“The under subscription is partly attributable to the relatively tight liquidity in the money market during the week,” said Cytonn Investments due to the tax payments with Pay as You Earn (PAYE) due on the ninth of every month.

Central Bank of Kenya (CBK) weekly data collaborates on the increased iquidity in the money market increased during the week resulting into “Commercial banks’ excess reserves stood at KSh 14.6 billion in relation to the 5.25 percent cash reserves requirement (CRR).”

The yields on the 91-day, 182-day, and 364-day papers remained unchanged at 6.9%, 8.3% and 9.5% respectively.

The acceptance rate declined to 89.4% from 90.0% recorded the previous week with the government accepting Ksh 19.5 billion of the Ksh 21.8 billion of the bids received.

Earlier in the week, Commercial Bank of Africa Analysts had said liquidity conditions could normalize this week with overnight rates expected to come off from the 5.29% levels seen at the end of the week. “This will be underpinned by flows from the government towards
FY2018/19 budget implementation.”

“Overall, we believe that yields across the curve are yet to bottom. Further declines will be supported by reduced pressure for local funding after raising nearly 70% of the planned domestic borrowing for the year,” said Stephanie Kimani and Faith Atiti from CBA.

According to CBA, this year, Treasury has outstanding maturities of Ksh 906.65 billion, with 85% being T-bills.

In last week’s auction, the 91-day Treasury bill came in at 6.89 percent, while the 182-day has a rate of 8.32 percent. Only the 364-day paper is offering more than the overdraft at 9.48 percent.