During the first quarter of 2021, T-bills were undersubscribed, with the overall subscription rate coming in at 94.1 percent, up from 84.7 percent in quarter 4 of 2020.
According to Cytonn Investment, the undersubscription was partly attributable to a slight improvement in the liquidity in the market during the quarter, which saw the average interbank rate declined to 5.4 percent, from 6.0 percent in quarter 4 of 2020, supported by government payments.
Overall subscriptions for the 91-day, 182-day, and 364-day papers came in at 69.4, 54.6, and 139.8 percent in Q1’2021, from 116.4, 51.5, and 100.5 percent in Q4’2020, with investors’ participation remaining skewed towards the longer 364-day paper.
The yields on all the papers increased with the 364-day, 182-day, and the 91-day T-bills to 9.3, 7.9, and 7.1 percent from 8.3, 7.7, and 6.9 percent respectively recorded at the end of quarter 4 of ’2020.
The acceptance rate for the quarter declined to 92.6 percent from 94.2 percent in Q4’2020, with the government accepting a total of Ksh.264.6 billion of the Ksh.287.1 billion worth of bids received during the quarter.
During the week, T-bills remained undersubscribed, with the overall subscription rate coming in at 29.9 percent, a decline from the undersubscription of 82.9 percent recorded last week.
The undersubscription was partly attributable due to the lower liquidity in the market and renewed fears by investors as they adopt a wait and see attitude, after the new government restrictions following a spike in the number of COVID-19.
Investors’ continued interest in the 364-day paper saw it record the highest subscription rate at 44.1 percent, a decrease from 166.0 percent recorded the previous week, as the paper has an attractive rate of 9.3 percent, which is higher than the rate for most bank placements.
The subscription rate for the 91-day and 182-day papers also declined to 50.5 and 7.6 percent, from 82.6 and 30.7 percent, respectively.
Yields on the 364-day and 182-day papers rose by 4.9 bps and 2.0 bps to 9.3 and 7.9 percent, respectively, while the rate on the 91-day paper declined by 0.2 bps to 7.1 percent.
The increase in the yields can be attributable to investors continuing to demand a premium for the elevated market risks following the increase in the number of COVID-19 infections.
The government continued to reject expensive bids by accepting Ksh.7.16 billion of the Ksh.7.19 billion bids received, translating to an acceptance rate of 99.6 percent.