T-bills Auctions Undersubscribed In January – Cytonn Report


During the month of January, T-bill auctions recorded an undersubscription, with the overall subscription rate coming in at 67.3%, but still an increase from 54.8% recorded in the month of December, 2020.

The highest subscription rate was in the 364-day paper, which came in at 115.9%, an increase from 50.4% recorded the previous month. The subscription for the 182-day and 91-day papers declined to 33.1% and 45.5% from 40.2% and 94.5% recorded in the month of December, 2020, respectively.

During the last week of January, T-bills subscription rate declined with the overall subscription rate coming in at 66.2%, from 84.5% recorded the previous week. This can be mainly attributed to the continued tightening of liquidity in the money markets. The highest subscription rate was in the 364-day paper at 134.2% but still a decline from 172.2% recorded the previous week. The subscription for the 182-day paper also declined to 19.7% from 53.7% recorded the previous week, while the 91-day paper increased to 12.7% from 9.2% recorded the previous week.

Read: Co-op Bank, Sanlam and Cytonn Named Top 3 Unit Trust Funds By CMA

During the month, the Central Bank of Kenya issued two bonds, FXD1/2021/002 and IFB1/2021/016, having effective tenors of 2 years and 16 years with coupons of 9.5% and 12.3%, respectively.  The two issues recorded high demand, with the overall subscription rate coming in at 244.6% and 250.7% respectively, mainly supported by the attractive tax-free nature of the infrastructure bond and improved liquidity in the market, respectively.

For the month of February, the government is seeking to raise Ksh50 billion for budgetary support by reopening two bonds, FXD1/2013/15 and FXD1/2012/20, with a time to maturity of 7.1 and 11.8 years, respectively. The bonds have coupons of 11.3% and 12.0% and are currently trading at a rate of 11.4% and 12.3%, respectively in the secondary market.

During the month of January, the equities market was on an upward trajectory, with NASI, NSE20 and NSE 25 gaining by 2.3%, 0.7%, and 0.6%, respectively. The equities market performance was driven by gains recorded by large-cap stocks such as BAT, Bamburi, and Safaricom, which gained by 12.5%, 11.1%, and 4.7%, respectively. The gains were however weighed down by losses recorded by banking stocks such as NCBA Group, KCB Group, and Standard Chartered Bank, which declined by 7.5%, 5.9%, and 4.0%, respectively.

Read: Britam-Cytonn Spat Rekindled As Directors, Including IFC, Swiss Re Are Accused of Violating Court Orders

In the retail sector, Giordano, a Hong Kong clothing retailer, opened its 3rd store in Nairobi at Two Rivers Mall along Kiambu Road, taking up 1,076 SQFT space. French retailer Carrefour, launched a new mobile application that is expected to enhance the online shopping experience for its Kenyan customers while Naivas Supermarket announced plans to open its 70th retail store at Kilifi Complex Centre in Kilifi towards the end of January taking up the 25,000 SQFT space previously occupied by troubled retailer Tuskys.

In the money markets, 3-month bank placements ended the week at 7.4%, while the yield on the 91-day T-bill declined by 8.6 bps to 7.0%.  The average yield of the Top 5 Money Market Funds remained unchanged at 10.0% from last week. The yield on the Cytonn Money Market declined marginally by 10.0 bps to 10.8% from the 10.9%, recorded the previous week.

The liquidity in the money markets tightened during the month of January mainly supported by government payments, with the average interbank rate increasing to 5.7%, from 2.7% recorded in December.

In the Month of January, the yields on government securities in the secondary market remained relatively stable while the bond turnover declined by 17.5% to Ksh45.5 billion, from Ksh55.2 billion recorded in December.

Read: Cytonn Report Recognises I&M Holdings As The Most Attractive Listed Bank

During the month, the yields on all Eurobonds recorded mixed performances. According to Reuters, the yield on the 10-year Eurobond issued in September 2014 declined by 0.3% points to 3.6% in January, from 3.9% in December.  The yields on the 10 year Eurobond issued in February 2018 increased marginally by 0.1% points to close at 5.3% in January, from the 5.2% recorded in December.

The 30-year Eurobond, on the other hand, increased by 0.2% points to close at 7.2% in January, from the 7.0% recorded in December. The yields on the 2019 issued dual-tranche Eurobond with 7-years declined by 0.1% points to 4.8% in January, from 4.9% in December. The 12-year Eurobond declined by 0.2% points to 6.1% in, from 5.9% in December.

During the month, the Kenya Shilling depreciated by 0.8% against the US Dollar to close the month at Kshs 110.1, from Kshs 109.2 recorded at the end of December 2020, mostly attributable to the high dollar demand from general importers as businesses resumed following the festive season.

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Written by Francis Muli

Follow me on Twitter @francismuli_. Email

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