Investors bid KSh68.5bn for T-bills as 91-day rate eases to 8.75%

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Investors offered the government KSh68.5bn for Treasury bills at the October 15 auction, more than twice the KSh28bn on sale, as demand for short-term government paper stayed strong and the benchmark 91-day rate slipped for a third straight week.

The auction performance of 244.6 per cent was disclosed in the Central Bank of Kenya’s (CBK) weekly bulletin released on Friday, October 16, which also showed a 30-year bond reopening drawing KSh83.8bn in bids against a KSh50bn target.

Investors crowd into the 91-day paper

Almost three quarters of the money chased the shortest tenor. The 91-day bill drew KSh49.8bn in bids against just KSh8bn offered, and the CBK took KSh34.2bn, more than four times the amount advertised. Its average rate eased to 8.750 per cent from 8.762 per cent a week earlier.

The 182-day bill attracted KSh12.1bn against KSh10bn on offer, with KSh11.5bn accepted at an average of 8.860 per cent, down from 8.874 per cent.

The 364-day bill was the only undersubscribed tenor, drawing KSh6.6bn against KSh10bn. The CBK accepted all the bids it received, at an average rate of 9.038 per cent, a hair above the previous week’s 9.035 per cent.

In total, the government took up KSh52.3bn across the three bills, against maturities of about KSh44.1bn, leaving it with roughly KSh8.2bn in fresh short-term borrowing for the week.

Rates edge lower after mid-year climb

The 91-day rate has been drifting down slowly from 8.828 per cent at the end of June, though it remains well above the 8.040 per cent recorded at the end of April. The moves are now measured in fractions of a basis point a week, which suggests the market is settling rather than heading for a sharp drop.

The heavy bias towards the shortest bill shows that banks and fund managers prefer to keep their money flexible. Last week, the 91-day paper also drew KSh50.2bn in bids against the same KSh8bn offer. Money market funds, which park much of their cash in short-dated government securities, track these rates closely. Investors weighing their options can compare what a money market fund actually earns against the T-bill rates, and the Capital Markets Authority is separately looking at risk ratings for about 320 unit trusts.

30-year bonds clear at up to 14.18%

At the October 14 bond auction, the CBK reopened two 30-year papers. The older SDB1/2011/030 drew KSh23.7bn in bids, with KSh19.2bn accepted at an average rate of 13.65 per cent. The newer FXD1/2026/030 drew KSh60.1bn, of which KSh33.9bn was accepted at an average of 14.18 per cent.

That gave the government about KSh53bn from the sale, slightly more than the KSh50bn it set out to raise. The auction was the second of two KSh50bn bond sales planned for October, as the Treasury leans more heavily on the local market to fund the budget. CBK Governor Kamau Thugge has said domestic lenders have room to absorb the extra borrowing, and the government is also in talks with the World Bank and AfDB for budget support.

Liquid market and a steady shilling

The bulletin said the money market remained liquid, with commercial banks holding average excess reserves of KSh20.5bn above the 3.25 per cent cash reserve ratio. The Kenya Shilling Overnight Interbank Average (KESONIA) held at 8.75 per cent.

The shilling traded at KSh129.81 to the US dollar on October 15, little changed from KSh129.94 a week earlier and close to the level we reported last week. Foreign exchange reserves stood at $14.69bn, equal to 5.9 months of import cover and above the CBK’s statutory minimum of four months.

The stock market had a weaker week, with the all-share NASI index falling 2.57 per cent. Secondary bond trading also slowed, with turnover down 18.22 per cent, after the NSE’s bond market passed KSh2.5 trillion in turnover for the year.

The next Treasury bill auction is due on Thursday, October 22. Readers planning their savings can also browse our free calculators and checkers.