Roundup: Investors pull back from Kenya's debt market as interest rates drop
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E-mail Xinhua, December 14, 2012
Investors are backing off from Kenya's government securities as interest rates plunge.
Treasury bills yields fell for the fifth conservative time in this week's auction discouraging investors from putting their money in the papers.
While interest rates on both 91-day and 182-day have been on a downward trajectory, the former has taken the worst beating.
The decline in yields has seen most offers by Central Bank of Kenya (CBK) record gross under subscription, with investors keeping off.
In this week's auction dated Dec. 17, interest rates on Kenya's 91-day Treasury bills fell by 0.17 percent. The yield declined from 8.34 percent at last week's auction to 8.17 percent.
"The weighted average rate of accepted bids, which will be applied for non-competitive bids, was 8.17 percent, down from 8.34 percent the previous week," said CBK in a brief on the auction.
During the sale, the bank had offered the three-month bills worth 47 million U.S. dollars. CBK received bids worth a paltry 6. 56 million dollars
"The total number of bids received amounted to 6.56 million dollars, representing a subscription of 14.1 percent. It accepted all the bids," said CBK.
The performance dropped significantly from the previous week's auction dated Dec. 10, where interest rates for the indicative bills fell from 8.45 percent to 8.34 percent.
Then, CBK offered bills worth 47 million dollars. The total number of bids received was 142 amounting to 30.9 billion dollars. This represented a subscription of 66 percent. The bank accepted all the bids.
Similarly, in the auction dated Dec. 3, yields for the benchmark bill plunged by 0.52 percent. The rates declined from 8. 99 percent in the past week's auction to 8.45 percent.
That week, CBK offered Treasury bills worth 47 million dollars. It received 184 bids, amounting to 92 million dollars, which represented a subscription of 196 percent. The bank accepted bids amounting to 75 million dollars.
The previous week's auction, where interest rate was 8.99 percent, saw the bank receive 216 bids worth 136 million dollars, representing a subscription of 279 percent. CBK accepted bids 56 million dollars.
Interest rate for the 91-day bill hit 10.34 in the first week of November. The yields have, however, been on steady decline since then as demand rises.
For the 182-day Treasury bills, yields fell in this week's auction dated Dec. 17 to 9.02 percent, from 9.08 percent in the previous sale.
"The weighted average rate of accepted bids, which will be applied for non-competitive bids was 9.02 percent from 9.08 percent the previous week," said CBK. Central Bank in the sale had offered bills worth 35.3 million dollars.
"The total number of bids received amounted to 11 million dollars," said CBK, which accepted all the bids.
The performance is a considerable decline from the previous week's auction dated Dec. 10, where interest rate was 9.08 percent.
During the week, the regulator offered the six-month bills worth 35.3 million dollars. Number of bids received was 74, amounting to 17.2 million dollars, which represented a subscription of 49 percent.
In the auction dated Dec. 3, where yields stood at 9.34 percent, investors showed great interest in the bills.
Then, the regulator offered 182-day bills worth 59 million dollars. The bank received 65 bids, amounting to 44 million dollars, which represented a 94 percent subscription.
Similarly, in the Nov. 26 auction, CBK offered 182-day Treasury bills worth 47 million dollars. The bank received 108 bids, amounting to 170 million dollars, representing a subscription of 361 percent.
Central Bank accepted bids worth 134 million dollars. The interest rate then stood at 9.77 percent. Interest rate for the 91- day bill hit a bottom low of 7.51 percent in September, before climbing steadily to 10.34 in November.
On the other hand, interest rate for the 182-day bill stood at 10.92 percent early November. The yields fell to 8.99 percent in September, when the debt market was at its lowest.
However, unlike the 91-day bill, interest rates for 182-day and 364-day papers are more stable.
Investors' appetite for the two bills has been higher than for the 91-day security.
As rates plummet further, investors are expected to seek alternative opportunities either at Nairobi Securities Exchange or in debt markets in other nations across Africa. Endi
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