Kenya’s Treasury bills remained heavily oversubscribed for a fourth consecutive week, reflecting sustained investor liquidity and a continued shift toward shorter maturities even as yields across tenors moved slightly lower.
Kenya’s Treasury bill market sustained strong momentum this week, recording its fourth consecutive oversubscription as investors continued to channel liquidity into government securities amid a gradually easing yield environment.
According to auction results from the Central Bank of Kenya, the overall subscription rate stood at 295.6 percent, moderating from 308.8 percent recorded the previous week but still indicating robust demand across all tenors.
Total bids reached Sh70.9 billion against an advertised offer of Sh24.0 billion, underscoring persistent appetite for risk-free government instruments at a time when money market conditions remain accommodative.
Short-term bias dominates investor positioning
Investor preference for shorter maturities remained pronounced, with the 91-day Treasury bill attracting bids worth Sh13.0 billion against an offer of Sh4.0 billion. This translated to a subscription rate of 326.2 percent, significantly higher than the 179.5 percent recorded in the prior auction.
The strong uptake of the shortest tenor reflects continued liquidity management strategies among investors, particularly banks and institutional players seeking flexibility amid expectations of a gradual interest rate easing cycle.
Market analysts note that short-dated securities typically gain favour during periods of policy transition, allowing investors to reinvest at potentially different rate levels as monetary conditions evolve.
Mixed demand across medium and long tenors
Demand for the 182-day paper improved markedly, with the subscription rate rising to 113.6 percent from 68.8 percent recorded a week earlier. The recovery signals renewed investor participation in medium-term instruments after a period of subdued interest.
Conversely, the 364-day paper registered a significant moderation in demand, with the subscription rate declining to 465.4 percent from 600.5 percent previously. Despite the drop, demand for the one-year instrument remained substantially above the offer, indicating continued confidence in medium-term government securities.
The shift suggests portfolio rebalancing rather than a structural change in sentiment, with investors distributing allocations across tenors while maintaining overall exposure to government debt.
Government acceptance reflects pricing discipline
Out of the Sh70.9 billion in bids received, the government accepted Sh49.1 billion, translating to an acceptance rate of 69.2 percent.
The selective acceptance level indicates ongoing pricing discipline by the issuer, which continues to balance funding requirements with cost management considerations in the domestic debt market.
Partial bid acceptance has become a recurring feature of recent auctions as authorities aim to take advantage of strong demand while avoiding upward pressure on borrowing costs.
Yields extend gradual downward trend
Treasury bill yields continued their modest downward trajectory across all tenors, reinforcing expectations of easing funding conditions within the domestic fixed income market.
The 364-day yield posted the largest movement, declining by 7.5 basis points to 8.9 percent from 9.0 percent recorded the previous week. Meanwhile, yields on the 91-day and 182-day papers edged down by 2.0 basis points each to 7.6 percent and 7.8 percent respectively.
The yield compression aligns with broader money market developments following recent monetary policy adjustments and abundant system liquidity.
Market outlook
Sustained oversubscription in Treasury bill auctions continues to signal strong liquidity levels within Kenya’s financial system, supported by institutional demand and cautious private sector credit expansion.
Going forward, investor positioning is expected to remain sensitive to monetary policy signals, inflation trends, and government domestic borrowing requirements, with short-term securities likely to retain strong demand amid expectations of continued rate stability or gradual easing.
