Last week’s subscription rate for the government Treasury bills nearly doubled as government spending picked up improving cash flow in the economy.
Data by the Central Bank of Kenya shows bids worth Sh24.5 billion were accepted during last week’s auction of the 91, 182, and 364- day T-bills against a target of Sh24 billion signaling renewed investor appetite in the short term debt facilities.
T-bills, used to raise cash to offset budget deficits, have been undersubscribed over the past three weeks as a result of slow government payments synonymous with the beginning of the financial year according to CBK.
CBK data shows the government securities market maintained a robust performance last month. The government’s fiscal agent collected Sh35.1 billion, Sh52.53 billion and Sh49.8 billion during the first three weeks of July. This dropped to ShSh21.2 billion during the July 26 auction.
Stanbic Bank economist for East Africa Jibran Qureishi said liquidity is expected to pick up at the end of the month, when firms finish paying their taxes and the government’s fiscal year gets properly underway.
“It is a very cyclical thing at the beginning of the (financial) year... By the end of August, we will improve,” he said.
The six-month debt security was undersubscribed by 27.44 per cent during last week’s auction with CBK receiving Sh7.26 billion of the Sh10 billion offered under the facility.
CBK received bids worth Sh6.15 billion for the three-month T-bills which recorded a 53.85 per cent oversubscription during the auction.
The 364-day T-bill surpassed their target by 12.51 per cent to rake in Sh11.25 billion of the Sh10 billion offered.
“All the three instruments offered were oversubscribed except for the 182- days Treasury bill that received a subscription rate of 72.83 per cent. Interest rates on the three Treasury bill tenors declined further during the auction of August 16, 2018,” CBK said in last week’s bulletin.
CBK data shows Interbank market liquidity conditions also improved during the week ending August 15 backed by increased government payments.
“The average volumes traded declined to Sh9.08 billion from Sh11.43 billion in the previous week, while the average number of deals decreased from 29 to 22,” the bulletin stated.