Cash-Rich Investors Scramble For Stable Profits in Treasury Bills

The Central Bank of Kenya (CBK) Weekly Treasury Bills Auction has been oversubscribed for three weeks in a row, a pointer to improving liquidity in the money market.

In this week’s auction, CBK received bids worth Ksh24.2 billion out of the Ksh24 billion that was on offer, an oversubscription of 104%.

This is compared to the auction held on Thursday last week, on 12^th November, 2020 where the CBK accepted bids worth Ksh29.66 billion from Ksh30.37 billion bids, a 126.55% subscription rate.

At the auction of 5^th November 2020, CBK accepted bids worth Ksh27.554 billion from this auction against Ksh24 Billion that was offered, representing a subscription rate of 115.93%.

Dealers attribute the three weeks trend to rising liquidity levels in the domestic money market. “The attraction is mainly towards the longer tenor 364-day Treasury Bill that is offering a higher yield. This is money that is chasing yield, at around 7.9% higher than interbank and a safe hedge in case rates fall down,” said Reginald Kadzutu, Head of Retail-Zamara.

He added that a rate of 3% on the interbank – a good indicator of liquidity levels in the banking sector – means the market is awash with cash given that banks are not loaning out much.

A dealer with one of the leading investment banks attributed the appetite for TBills to investors seeking safer and stable assets.

 “The equities markets have been hammered and the Q3 results from listed entities are not showing any light. Also, investors are always seeking assets that pay returns (dividends/interests/coupons). Most assets outside the fixed income segment are likely not to pay dividends in the coming year,” said the dealer.

At this week’s auction, the 91-day Treasury bill received bids worth Ksh5.6 Billion against Ksh4 billion that was offered, an oversubscription of 139.6%. The 364-day Treasury Bills worth Ksh10 billion that was also on offer at this auction, received bids from investors amounting to Ksh12.9 billion, a 139.6 % oversubscription.

Investors bid Ksh6.5 Billion for the Ksh10 billion of the 182-day Treasury Bills that was offered at the auction, an undersubscription of 65%.

The next T Bills auction, where CBK is seeking to borrow Ksh24 billion from the domestic money market, is scheduled for Thursday, 26^th November 2020. 

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