This archive report was first published on 17 December 2019.
On December 17, 2019, the Treasury bills market experienced a decline in subscription rates, with the percentage of subscribed bills falling from 55.3% to 53.5%. This decrease in subscription rates is attributed to the tightening of liquidity in the market.
According to a Cytonn report, the reduced participation of banks in the Treasury bills market is due to their preference to lend to the private sector following the repeal of the rate cap legislation.
Interbank rates rose to 5% on Friday, significantly higher than the 2% recorded last month. This increase in interbank rates reduced the money supply available for investment in Treasury bills, further contributing to the decline in subscription rates.
As a result, the government may face short-term challenges in meeting its borrowing needs through Treasury bills. However, analysts expect banks to maintain their position in Treasury bills to provide a buffer in their balance sheets.
Analysts had anticipated the slow uptake of Treasury bills due to changes in policy surrounding the interest rate cap. Prior to the rate cap repeal, Treasury bills were the most viable option for banks. However, with the repeal, banks now have opportunities to earn higher returns from the private sector.
As noted by Churchill Ogutu, Genghis Capital, the market is anticipating a tap sale following the rejection of the 9.73. This is expected to lead to subdued trading sessions in the week, with most institutional investors taking a back seat.
