• In the weekly auction ending August 8, National Treasury received bids worth Sh29.5 billion for 91-day, 182-day and 364-days Treasury bills, an Sh3.5 billion less compared to Sh33.0 billion received in the week ending August 1.
• The under-performance could be held to commercial banks shying away from the treasury notes due to lower total returns and a shift to customers.
The uptake for government securities still swing low, as banks among other investors confirm their disinterest in the markets.
In the weekly auction ending August 8, National Treasury received bids worth Sh29.5 billion for 91-day, 182-day and 364-days Treasury bills, a Sh3.5 billion less compared to Sh33.0 billion received in the week ending August 1.
Central Bank's data showed that Treasury accepted bids worth Sh26.63 billion in the week.
This was amid falling yields on the securities especially on the 91-day and 182- day Treasury bills to 6.45 per cent and 7.15 per cent respectively.
The 364-day Treasury bills increased marginally for the third consecutive week to 9.15 per cent.
The performance of the fixed income securities indicated a cuffed demand coupled with Sh26.0 billion and Sh27.2 billion worth in bids received for auctions ending July 18 and July 25, against advertised Sh24 billion.
This underperformance could be held to commercial banks shying away from the treasury notes due to lower total returns.
During the release of the 2019 half-year results by Stanbic Group, lending to the government remained almost flat, with a shift to customers.
In the six months to June, investments to securities increased by 2.79 per cent to Sh94.09 billion from Sh91.54 billion set aside in similar period to June 2018.
This compared to Sh177.08 billion in loan and advances to banks and customers, a 14.96 per cent growth compared to Sh154.03 billion over the period.
Equity Bank Group that also announced its financials days before, said to have cut back its loans to the Treasury in favour of the mass market.
The bank’s loan book expanded 17 per cent to Sh320.9 billion in the six months period, as the banks re-shifted to small and medium enterprises (SMEs) lending.
Loans to the Treasury increased at a slower pace of 13 per cent to Sh179.6 billion in the period.
According to Cytonn Investments topical on July 28, the government securities’ market has a normal shaped yield curve currently with the market skewed towards the longer-dated government securities.
The 91-day, 5-year and 24-year government securities have yields of 6.6 per cent on average, 10.2 per cent and 12.9 per cent respectively.
This while customer borrowed loans have interest rates of 13 per cent.
“With the normal shaped yield curve, investors expect a higher return for a longer period of investment as it carries greater risk,” Cytonn stated.
Apart from the yields on the short-term securities in the Kenyan market, the slow economic activity WITH equities market posting a 27 per cent decline in trading turnover and competition for market share to intensify.
“Trading activity in the domestic secondary bond market declined by 42.2 per cent,” CBK weekly bulletin stated.
In the international market, yields on 7-year, 10-year (2024) and 10-year (2028) Eurobonds declined by 2.7, 3.3 and 3.5 basis points, respectively, while those on the 12-year and 30-year Eurobonds increased by 27.5 and 8.8 basis points, respectively.