This week, the Central Bank of Kenya (CBK) will auction 91 day and 182 day Treasury bills worth KES 2 billion each. The auction for the 91  day bills will be on Thursday 31^st while the 182 day auction will be today, Wednesday 30^th May.

At the auctions, we will be looking out for the following:

• The subscription rate: this is the rate at which potential investors in the security bid for it. Ordinarily government securities attract bids worth more than the targeted amount. However, at the last auction, both the 91 and 182 day bills attracted bids worth much less than the amount the CBK intended to sell. Last week the 91 day one attracted 64% subscription while the 182 day one attracted 22% subscription.
• The yield: this is the rate at which investors will earn interest for investing in the securities. For the greater part of the last 4 months the yields on both these securities has been above 15%. Since the beginning of May the yields have steadily declined from highs of 15% to 12% and as at the last auction the yields on the 91 day stood at 9.875% while the 182 day one was 10.915%. The lower (than has been usual) yields has caused foreign investors to seek alternative investments as the high yield that attracted them in the first place is no more.

Depending on the value of the above we will be able to tell whether there is demand for government securities and thus the market sentiment on the returns they provide.