BIDDING

Treasury bills oversubscribed as banks opt for short term gains

In Summary
  • According to the weekly result by the Central Bank of Kenya (CBK), bids worth Sh20 billion were received for 91 days T-Bill against Sh4 billion advertised.
  • Banks have in the past 12 weeks shifted investment to secure government papers to safeguard investors from vagaries of Covid-19 that has seen high default rate arising from personal and business segments.
Central Bank CBK Headquarters
Central Bank CBK Headquarters
Image: /FILE

Banks flocked to government securities this week for short term gains, a move that saw Treasury Bills oversubscribed by up to five times.

According to the weekly result by the Central Bank of Kenya (CBK), bids worth Sh20 billion were received for 91 days T-Bill against Sh4 billion advertised.

Bids worth Sh26.8 billion were received for 182 day short-term paper against Sh10 billion advertised, translating to an oversubscription of almost 270 per cent.

There was almost three times subscription for the one year T-bills after bids worth Sh28.9 billion were received against the advertised value of Sh10 billion.

Banks have in the past 12 weeks shifted investment to secure government papers to safeguard investors from vagaries of Covid-19 that has seen high default rate arising from personal and business segments.

There was a similar spike in demand for government papers by lenders when the interest cap law scrapped late last year was introduced in 2016.

The high demand has however triggered diminishing returns, with interest for 91 days T-Bill shrinking to 6.5 per cent from seven per cent last year