Yields on government papers drop further on high demand

The yield on government papers dropped further this week as oversubscription entered the fourth month

According to auction results by the Central Bank of Kenya (CBK), yields on 91, 182 and 364 depreciated by an average variance of 25 basis points, with returns on the 91-Day T-Bill shrinking from 6.27 per cent last week to 6.01 percent.

Returns on 182 T-Bill and the one year dropped 6.5 and 7.4 per cent respectively from 6.8 and 7.7 per cent.

During the week, bids worth Sh24 billion were offered against a subscription of Sh65 billion. The government however accepted bids worth Sh45 billion.

Investors were more interested in short term papers, oversubscribing 91-Day bills by 745 per cent. The government offered bids worth Sh4 billion but investors pumped in nearly Sh30 billion.

The 182 and 364 bills were oversubscribed by 107 and 245 per cent respectively.

The over-subscription is an indication that banks have ditched ordinary borrowers viewed as high risk and instead opted for government securities despite low returns.

The latest data by CBK shows that banks extended the repayment period of personal loans to customers, worth Sh105.2 billion at the end of April 2020.

This is compared to Sh9.9 billion in March.

This as households and firms experienced difficulty in serving their loan repayment obligations due to Covid-19 related disruptions.

The data further shows rescheduling involved 39,725 loan accounts from 6,430 accounts in March 2020.

Personal loans make up 3.6 per cent of the total banking sector loan book as at April of Sh2.868 trillion.

The Covid-19 heat is expected to reflect on the banks’ balance sheet starting next week as they post half-year results. Kenya recorded the first coronavirus case mid-March.

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