Roundup: Investors cash in on Kenya's Treasury bills as yields surge

Kenya's short-term Treasury bills have attracted massive interest from investors as yields increase.

Offers put on sale this week were hugely oversubscribed as investors sought to cash in on the rising interest rates.

Interest rate on the 91-day paper rose to 14 percent in this week's auction dated Sept. 11, up from 12 percent in the previous week.

The yield on the T-bill has been on the rise since the Central Bank of Kenya (CBK) raised its benchmark rate by 3 percent to a high of 11.5 percent as it sought to mop up excess liquidity in the market to cushion the shilling from weakening against major world currencies.

Similarly, the interest rate on the 182-day bill surged to 13 percent in this week's auction, up from 12 percent at the end of July. The yield on the 364-day bill, on the other hand, rose to 15 percent this week, growing from 14 percent at the end of July.

The surge in the rates has made investors troop to the debt market, with all offers CBK put on sale this week being massively oversubscribed. The CBK, as in the past auctions, put on sale 91-day T-bills worth 29 million U.S. dollars.

The offer received a subscription of over 280 percent, almost triple what the CBK was looking for.

"The total number of bids received was 151 amounting to 80 million dollars, representing a subscription of 282 percent. The total bids accepted amounted to 71 million dollars," said John Birech, CBK's acting director, financial markets in a brief on the auction.

"The market weighted average rate was 14.2 percent and the weighted average of accepted bids, which will be applied for non-competitive bids, was 13.8 percent, up from 11.5 percent in the previous auction," he added.

In the auction dated Sept. 3, the apex bank put on sale bills worth 29 million dollars and received a paltry 13 million dollars.

Similarly, this week, the CBK put on sale 182-day bills worth 38 million dollars and 364-day bills worth a similar amount.

The bank received bids worth 107.4 million dollars for the 76 million dollars it had offered and accepted 90.4 million dollars.

"The total number of bids received was 66 amounting to 49 million dollars representing a subscription of 129 percent, and 88 bids amounting to 59 million dollars representing a subscription of 154 percent for the 182-day and 364-day bills respectively," said Birech.

In the last auction dated Sept. 3, CBK offered 76 million dollars worth of the two bonds and received bids worth 16 million dollars for the 182-day and 12 million dollars for 364-day bills.

Analysts note that the debt market will continue to attract investors in the coming weeks as the rates remain high for the CBK to mop up excess liquidity to save the shilling.

The CBK next week has put on sale 91-day bills worth 28 million dollars, and 182 and 364 day bills worth 38 million dollars. In addition, the bank is also selling a one-year Treasury bond worth 286 million dollars. Enditem