Central Bank of Kenya(CBK), received a surge in bids submitted by investors at its Weekly Treasury Bills Auction amounting to KSh 44,812 million, out of KSh 24,000 million offered, an oversubscription of 186.72%. This is the 8th consecutive oversubscription as investors chase returns in Government paper against a falling yield curve.
According to the latest Weekly Bulletin from CBK, Interest rates on the 91-day and 364-day Treasury bills declined marginally while that for the 182-day instrument remained stable.
Central Bank of Kenya offer to Bidders at the Weekly Auction
Investors submitted bids worth KSh26,354.15 million for the one-year debt instrument against KSh 10,000 million offered, with the monetary authority accepting KSh 26,350.23 million. The CBK was willing to pay a rate of 9.3759% for this paper against 9.3760%, what investors were willing to lend at.
The Market Weighted Average Interest Rate, which is the what bidders were willing to lend at for the 91-day instrument was 7.7790% against what CBK was willing to pay for the debt instrument, or Weighted Average Interest Rates of accepted 91-day bids of 7.7789%.
The Central Bank of Kenya also received bids worth KSh 17,943.16 Million against KSh 4,000 million for the 91-day Treasury Bill, the most attractive instrument that offering a return of 7.7889%. The CBK accepted KSh 17,938.26million, an oversubscription of 448.58%.
The 182-day Treasury Bill was the least attractive, receiving bids worth KSh 515.21million against KSh 19 billion offered, with the Central Bank of Kenya accepting the entire amount. This debt instrument has a return of 7.8%.
This week’s Central Bank of Kenya Treasury Bills Auction is the 8th consecutive one that has witnessed an oversubscription.
A weekly fixed income report by Standard Investment Bank(SIB) shows that in the week prior, investors placed bids worth KSh 43.42billion, for the KSh 24 billion paper, with the fiscal agent accepting 99.9% of the bids.
This quantum was above the maturity amounts, resulting in a net borrowing of KSh 4.34billion. In absolute terms, the 364-day paper received the highest interest, with the paper garnering 59.3% of the total bids.
Additionally, the 91-day paper reported the highest subscription rate at 336.6%, while the 182-day paper recorded a relatively softer performance of 42.3%.
Ultimately, KSh 43.39bn was accepted at 7.78%, 7.80%, and 9.38% (+2.15bps) for the 91-day, 182-day, and 364- day papers, respectively.
Demand for Government securities remains high allowing the CBK to borrow from the domestic money market at much lower rates.
“The current yield is still attractive to banks, fund managers and pension funds. Given that US Treasury Securities are also earning low, the yield on our Treasury Securities is still very attractive to foreign investors,” said CFA Dedan Maina, an investment banker.
Market watchers maintain that if US Treasury Securities begin earning more, as the Feds halt the rate cuts or hike the rates, the US Government paper will be more attractive. CBK will then have to offer more competitive returns to match.
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