Commercial banks scramble for Kenya's T-bills despite falling yields

A drop in yields on Kenya's government securities has not dissuaded investors, mainly commercial banks, from buying the papers.

The financial institutions continue to swarm Treasury with high bids on all offers floated despite rates for the 91-day bill falling below 8 percent and those for 182 and 364 day bills gravitating to less than 10 percent.

In this week's auction, the Central Bank of Kenya (CBK) offered for sale 182-day and 364-day bills worth 59 million U.S. dollars each.

Both securities were massively oversubscribed as Treasury borrowed more than it has sought in the two offers.

The total number of bids amounted to 120 million U.S. dollars for the 182-day bill representing a 201 percent subscription. On the other hand, the 364-day bill attracted bids totalling 76 million dollars representing a subscription of 127 percent.

"Bids accepted amounted to 102 million dollars for the 182 days security and 76 million dollars for the 364 days bills," said the Central Bank Thursday.

Interestingly, the weighted average rate of accepted bids for the securities declined to 10.34 percent for the 182-day paper and 10.343 percent for 364-day.

According to the CBK, yield on the 182-day bill in the auction dropped by 0.076 points while the 364-day by 0.074, a negative trend witnessed in the last four weeks.

Interest rate on the 92-day bill stands at 7.8 percent having fallen from over 8 percent in the last few weeks due to high bidding.

Analysts have noted that the rates would continue to fall mainly due to high bidding from commercial banks, which have switched to the securities following the introduction of rate caps on loan charges last month. Endit