T-bills undersubscribed for third sale in a row

The weekly Treasury bills auction at the Central Bank of Kenya (CBK) was undersubscribed for the third straight week, with investors instead pumping money into bond auctions in search of higher yields.

The slowing demand in the T-bill market is also an indicator of tightening liquidity in the money market, following weeks of heavy borrowing from the domestic market by the Treasury.

CBK data shows that in last week’s T-bills auction, investors offered the government a total of Sh12.56 billion against the target of Sh24 billion across the three tenors of 91, 182 and 364- days.

CBK took up Sh10.73 billion, with the rates across all three tenors recording marginal increases of between 0.1 and 2.5 basis points.

In the previous two weekly auctions, investors had bid Sh9.7 billion and Sh22.3 billion.

Last week, the government concluded the sale of an 11-year, Sh70 billion tax-free infrastructure bond, which was oversubscribed, attracting bids worth Sh101.5 billion, hence the lack of demand on the T-bill market.

Earlier this month, the Treasury also made a tap sale of a 20-year bond that was first sold in 2018. The sale attracted bids worth Sh40.3 billion.