Kenya's indicative T-bill underperforms on low yields

Kenya's benchmark 91-day Treasury bill performed poorly for the second straight week as investors shunned it due to poor yields.

The paper was once again heavily undersubscribed this week, pulling bids that amounted to 44 percent of the 38 million U.S. dollars sought, auction data from the Central Bank of Kenya (CBK) showed Friday.

"The total number of bids received amounted to 17 million dollars while total bids accepted were valued at 13 million dollars," said the CBK.

Yield on the bill stood at 8.65 percent from 8.66 percent. The paper was the only one to record a decline as both the 182-day and 364-day bills registered rises in this week's auctions.

Last week, the paper attracted bids worth 37 million dollars, a subscription of 93 percent, with the apex bank only accepting 25 million dollars.

Analysts noted that the 91-day T-bill is currently trading below its five-year average of 10 percent and attributed the poor yield to low interest environment following the operationalisation of the Banking (Amendment) Act 2015, which has led to investors channeling funds more actively towards government securities.

"There is also reduced pressure from the government borrowing programme as they are currently ahead of the pro-rated domestic borrowing target of 140 million dollars, having borrowed 156 million dollars, which is 111 percent of the pro-rated target," noted Cytonn, a Nairobi-based investment firm.

As the 91-day paper performs dismally, investors have shifted to the 182-day and 364-day paper.

This week, CBK sought 58 million dollars from each of the bills and received 172 million dollars representing 299 percent subscription and 60 million dollars accounting for 137 percent subscription for 182 and 364 days bills, respectively. Endit