Yield on Treasury Bills falls as investors appetite swell

NAIROBI, Kenya:

Despite interest rates on short-term government securities falling for the third consecutive week, investors’ appetite for the papers continued to soar,with most bids being oversubscribed.

Weighted average yield for both 91-day and 184-day Treasury bills declined amid massive oversubscription of bids offered by Kenya’s government through the Central Bank of Kenya (CBK). Results from CBK indicated that weighted average yield on the benchmark 91-day Treasury bill plunged to 10.3 percent in the auction dated August 20, from 12 percent in the previous week’s auction. This represents a decline of 1.7 percent.

During the Aug. 13 auction, interest rate had dropped by 0.864 percent from 12.8 to 12 percent.Similarly, weighted average yield for 182-day Treasury bill for the week ending Aug. 20 declined from 12.6 percent in the previous auction to 11.4 percent. The rates fell by 0.4 percent in the auction dated August 13, from 13 percent in the previous auction to 12.6 percent.

Similar fall was registered with the 364-day Treasury bill during the August 13 auction, where interest rate plunged from 13 percent to 12.8 percent. Drop in yields on the short-term papers follow a steady rise in previous months, where interest rates jumped from a low of 9.3 percent in early June to 13.4 percent end of July. But despite decline in yields, investors in the East African nation show massive interest in the papers as many seek to cash in on the current rates before they plummet further.

In the auction dated Aug. 20, CBK offered 91-day Treasury bill worth 48 million dollars and received bids worth 209 million dollars.”Central Bank of Kenya offered 48 million dollars worth of 91- day Treasury Bills.

The total number of bids received amounted to 209 million dollars, representing a subscription of 439 percent. Bids accepted amounted to 65 million dollars,” said CBK’s director financial markets department Gerald Nyaoma in a brief on the auction.

The massive oversubscription in this week’s auction happened despite interest rates having dropped by 0.86 percent to 12 percent in the August 13 auction.During the auction, CBK offered 91-day Treasury bills worth 48 million dollars.

“The total number of bids received was 272 amounting to 205 million dollars and representing a subscription of 432 percent. The total bids accepted amounted to 71 million dollars,” said Nyaoma.

The results indicated that investors’ appetite in the August 20 auction surged by 6 million dollars, despite drop in yields. Similar rise in demand was recorded with the 184-day Treasury bill in this week’s auction despite interest rate having fallen to 12.6 percent from 13.4 percent.

CBK offered bids worth 48 million dollars. “The total number of bids received was 138 amounting to 185 million dollars, representing a subscription of 391 percent. Bids accepted amounted to 61 million dollars,” data from CBK indicated. In the auction dated August 13, CBK had offered bids worth 48 million dollars.

“The total number of bids received was 132 amounting to 127 million dollars representing 267 percent subscription. Bids accepted amounted to 54 million dollars,” said data from the regulator.

Similar demand was witnessed with the 364-day Treasury bill in the auction, where CBK offered bids worth 130 million dollars.”The total number of bids received was 73 amounting to 118 million dollars. Bids accepted amounted to 84 million dollars,” said results from the bank.

Analysts note demand for government papers has swelled because of commercial banks. The financial institutions have trooped back to the debt market after interest rates on Term Auction Deposits plummeted below Treasury bill yields making government debt more lucrative.

However, it is forecasted that yields on the short-term papers will fall further in the coming auctions mainly due to decline in CBK bench-mark lending rate to 16.5 percent after staying at 18 percent for over six months.Commercial banks in the East African nation have responded to the drop in CBK rate by cutting their lending rates to about 21 percent.

This move, according to analysts, also has contributed to developments at the debt market. CBK announced that in the coming auction dated Aug. 27, it will offer bids worth 95 million dollars of Treasury bills. The bank is currently offering for sale two-year fixed bond worth 119 million dollars for budgetary support. (Xinhua)