17 February 2017

Kenya: High Yields Make Kenya's 182-Day Treasury Bill Investors' Favourite

Nairobi — Higher returns on Kenya's 182-day Treasury bill have made it investors' favourite, with subscription this week peaking at over 300 percent.

Interest rate on the paper stood at 10.524 percent in this week's auction, a marginal rise from 10.521 percent, auction data from Central Bank of Kenya (CBK) showed Thursday.

Despite the marginal rise, investors for the third straight-week swarmed the apex bank with heavy bids, for the bill surpassing last week's performance.

"This week, the Central Bank offered 182 days Treasury bill for a total of 58 million dollars. The total number of bids received was 378 amounting to 175 million U.S. dollars representing 300.4 percent subscription," said the CBK, which absorbed 135 million dollars from the bids.

Last week, the bank sought to raise 58 million dollars from the paper and received bids that amounted to 172 million dollars representing 299 percent subscription.

The security has out-performed the 91-day and 364-day bills, with the latter this week receiving bids that amounted to 96 million dollars. The regulator absorbed bids worth 94 million dollars at 10.93 percent, a drop from 10.94 percent.

However, as the two Treasury bills perform well, the 91-day paper has been shunned by investors, underperforming in the last three auctions.

Analysts noted that the 91-day paper is witnessing under-subscription as investors express preference for the 182 and 364-day papers because they offer investors higher returns on a risk-adjusted basis.

"Given the possible upward pressures on interest rates, we maintain our recommendation for investors to be biased towards short-term fixed income instruments. The Central Bank has remained disciplined in maintaining rates and we have seen the market respond to this with the current absorption rate," said Cytonn, a Nairobi-based investment firm.

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