In a clear sign of investor confidence, the latest Treasury Bills auction conducted by the Central Bank of Kenya (CBK) has witnessed a remarkable performance, despite the ongoing economic challenges. The auction, which covered 91-day, 182-day, and 364-day Treasury Bills, saw a significant oversubscription, highlighting the attractiveness of government securities as a safe investment option in the current economic climate.
High Demand Across All Tenors The auction offered a total of Kshs 24 billion across the three tenors, with bids received amounting to Kshs 25.74 billion, translating to an overall performance rate of 107.25%. This oversubscription indicates robust demand, particularly for the 91-day and 182-day bills, which recorded performance rates of 262.93% and 110.39%, respectively. The 364-day bill, while still in demand, saw a more modest performance rate of 41.85%.
Interest Rates Reflect Market Sentiment The market-weighted average interest rates for the accepted bids were 15.8245% for the 91-day bill, 16.7082% for the 182-day bill, and 17.0409% for the 364-day bill. These rates reflect a slight variance from the previous auction, with the 91-day bill seeing a minimal decrease of 0.0083%, the 182-day bill a decrease of 0.0069%, and the 364-day bill a decrease of 0.0477%. The stability in these rates suggests that investors remain cautiously optimistic about the government’s fiscal position.
Significant Acceptance of Non-Competitive Bids A notable feature of this auction was the substantial acceptance of non-competitive bids, which amounted to Kshs 10.95 billion. This represents nearly half of the total amount accepted, underscoring the preference among smaller investors and institutions for the relative safety and assured returns of Treasury Bills. Non-competitive bids are capped at Kshs 50 million per investor per tenor, making them accessible to a broader range of investors.
Purpose of Funds and New Borrowing The CBK’s auction results also provide insight into the government’s fiscal strategy. The total amount accepted from the auction was Kshs 25.62 billion, with Kshs 26.37 billion allocated for rollover/redemptions. This means that Kshs 2.72 billion was earmarked for new borrowing, reflecting the government’s ongoing need to finance its budget deficit. The relatively small amount of new borrowing suggests a cautious approach by the government, likely influenced by the current economic uncertainties.
Upcoming Auctions and Investor Participation Looking ahead, the CBK has announced the next Treasury Bills auction, which will take place on August 22, 2024, for issue numbers 2592/91, 2565/182, and 2519/364. Investors are encouraged to submit their bids electronically via DhowCSD or Treasury Mobile Direct by 2:00 p.m. on the day of the auction. The CBK has emphasized the importance of adhering to the submission deadlines and ensuring that payments are made by electronic transfer by August 26, 2024.
Conclusion: A Resilient Market Amidst Challenges The results of this auction underscore the resilience of Kenya’s financial markets, even in the face of economic challenges such as volatile currency exchange rates, inflationary pressures, and political uncertainties. The continued strong demand for Treasury Bills highlights the confidence that investors have in government securities as a secure and stable investment option. As the government navigates the complexities of fiscal management, the role of Treasury Bills in financing public expenditure remains pivotal.
