In a recently concluded auction on September 30, 2024, the Central Bank of Kenya (CBK) raised Ksh 12.46 billion from its Treasury Bill offers, falling short of the Ksh 24 billion target. Despite this, the auction saw a mix of strong bidding and varied performances across the 91-day, 182-day, and 364-day T-bills, reflecting shifting investor appetite in a volatile economic environment.
Highlights of the Auction:
- 91-Day T-bill: Overwhelming Demand
- The 91-day Treasury bill was the standout performer, attracting Ksh 6.92 billion in bids against an offer of Ksh 4 billion. This represents a performance rate of 172.98%, signaling heightened interest in short-term securities amidst market uncertainty. CBK accepted Ksh 3.37 billion, with a weighted average interest rate of 15.72%, slightly lower than the previous auction’s 15.75%.
- 182-Day T-bill: Tepid Response
- The 182-day Treasury bill saw significantly weaker demand, receiving Ksh 5.43 billion in bids, well below its Ksh 10 billion target, translating to a performance rate of 54.38%. CBK accepted Ksh 3.33 billion at a weighted average interest rate of 16.59%. The competitive bid environment and higher interest rates reflect investors’ cautious approach to medium-term lending.
- 364-Day T-bill: Moderate Interest
- The 364-day Treasury bill garnered Ksh 8.57 billion in bids against a Ksh 10 billion offer, achieving a performance rate of 85.67%. CBK accepted Ksh 5.76 billion at a weighted average interest rate of 16.80%. The slight reduction in the accepted interest rate, compared to the last auction, indicates stabilizing investor expectations for long-term yields.
Competitive vs. Non-Competitive Bids
A key feature of the auction was the split between competitive and non-competitive bids. Competitive bids accounted for Ksh 8.39 billion, while non-competitive bids amounted to Ksh 4.07 billion. Investors in the competitive space had to place higher bids due to increased market demand for certain tenors, with a bid-to-cover ratio averaging 1.68 across all tenors.
Market Trends and Implications
The higher-than-expected participation in the 91-day T-bill suggests that investors are favoring liquidity and shorter repayment periods, driven by economic concerns and anticipated fiscal tightening. The relatively tepid performance of the 182-day and 364-day bills may indicate investor hesitancy to lock funds in longer-term instruments, especially as the market anticipates further interest rate adjustments.
Looking Ahead
As CBK continues to manage liquidity and borrowing through these weekly Treasury Bill auctions, the market will closely watch upcoming issues, including the next auction on October 7, 2024. With the economic landscape still uncertain, investors are likely to remain cautious, focusing on balancing yield expectations with risk management.
This auction marks a critical moment in Kenya’s monetary policy, with the results hinting at broader economic trends that could influence investment strategies in the months ahead. The Central Bank will be tasked with adjusting its approach to meet market needs while ensuring fiscal stability.
