Yesterday the Central Bank of Kenya (CBK) auctioned 182 day and 364 day Treasury bills worth KES 4 billion. For the shorter dated bill the bank received 145 bids amounting to KES 4.6 billion which represents a subscription of 232%. For the one year bill, the bank received 126 bids worth KES 8.6 billion representing a subscription rate of 413%. Clearly, the trend of gross oversubscription for government securities as we observed at the last auction continued in yesterday’s.

The CBK accepted bids worth KES 1.91 billion for the 182 day bill and bids worth KES 2.05 billion for the 364 day bill. The weighted average yield on the 182 bill was observed to be 13.076%, this is 1.699% lower than the yield observed at the previous auction. For the 364, the yield stood at 12.431% 4.484% lower than it was at the last auction.

The yields on government securities have been steadily increasing since last year in response to CBK monetary policy to stabilise the shilling and bring down inflation. This decline could be attributed to the success of the monetary policy and thus the bank may not necessarily need to mop up as much money from the economy as they had been doing.

The abnormally high subscription rate on the securities can be attributed to investor expectations that yields on securities will start to decline as the inflation rate falls. This fall would be in line with the CBK’s monetary policy and investors see these bills as opportunities to benefit from high rates before they fall

The results of the auction are summarised below:

[caption id="attachment_6639" align="alignleft" width="781" caption="Image Sourced from www.centralbank.go.ke"][/caption]

[caption id="attachment_6640" align="alignleft" width="781" caption="Image Sourced from www.centralbank.go.ke"][/caption]

At next week’s auction the CBK will offer 91 day and 182 day bills worth KES 2 billion each.