The Central Bank of Kenya has reported that this week's auction for the 91 day Treasury bill (T-bill) was subscribed 182%. This is a significant rise considering that last week the bids for the T-bills were 90%, an under-subscription of 10%. This is the second over-subscription in 11 weeks, with the last one being two weeks ago.

The market weighted average rate was up for the third week to  8.765 %, the rise can be attributed to the rising rate of inflation which according to the Kenya National Bureau of Statistics (KNBS) stood at 8.36% for the month of August. If the rate of inflation surpasses the rate of the T-bill, those who bid for the T-bills would effectively be losers at the end of the T-bill period. This is because the value of the money they would receive from the Central Bank would be lower in value to the money they lent to the bank when they bought the T-Bill. Therefore, the T-bill rate tends to be higher than the rate of inflation.

[caption id="attachment_35740" align="aligncenter" width="608"] Inflation and CPI rates in Kenya. Source: KNBS[/caption]

However, the  182 day T-bills  were under-subscribed. Only KES 1.5 billion of bids were received compared to  the KES 4 billion bills on offer. The  364 day T-bills  were over-subscribed by 118%.  Their average market rate was 10.627% compared to the 8.796% of the 182 day bill. The high rate of the 364 day T-bills  can also be explained by the inflation figures above.

The CBK also announced the closing date for next week's T bill auctions. 2nd of October for the 91 day T bill and 1st of October for the others.

For the full CBK press release on the 91 day T-bill, click here.

The CBK press release for the 182 and 364 day T-bills can be obtained here.