The latest weekly government securities auction witnessed a notable development marginal decline in interest rates offered on Treasury bills by the Central Bank of Kenya (CBK). This shift marks the first instance of such a trend in the past 24 months, signalling a potential shift in the financial landscape of the country.
Despite the decline, investor interest remained strong, with CBK receiving bids worth KSh 28.5 billion at the weekly T-Bills auction, surpassing the KSh 24 billion offered at the Government Securities Market. The CBK’s weekly bulletin revealed that while interest rates on the 364-day Treasury bill remained stable, rates for the 91-day and 182-day Treasury bills experienced marginal decreases. Notably, investors preferred short-term 91-day Treasury bills, with bids worth KSh 7.9 billion out of KSh 4 billion on offer.
In a parallel development, the results of the April T-Bonds Tap Sale showcased robust investor appetite. The state fiscal agent received bids worth KSh 47.8 billion for the 5-year and 10-year Treasury bonds, significantly exceeding the advertised amount of KSh 25 billion. Ultimately, the state fiscal agent accepted KSh 45.8 billion, indicating an overwhelming response from investors.
The 5-year Treasury bond emerged as the most attractive option, garnering bids worth KSh 35.6 billion at a coupon rate of 16.8440. Meanwhile, the 10-year Treasury bond received bids worth KSh 12.2 billion, with KSh 11.9 billion accepted, offering successful bidders a coupon rate of 16%. Despite the oversubscription, the weighted average yield of accepted bids for existing Treasury bonds remained unchanged.
With an inflation rate of 5.7% as of March 2024, the real return of these bonds stands at 12.7% and 10.8%, respectively, signalling favourable investment opportunities amidst economic conditions. These developments come as the government hints at plans to reduce domestic financing, potentially aiming to ease pressure on the market and stimulate economic activity.
