Treasury only accepted Sh16.6 billion against bids of Sh25.3 billion. The government seems to have run out of space to seek additional loans from local investors after it rejected bids running into billions of shillings for its securities.
This has left local investors, particularly commercial banks with the arduous task of finding the safest place to park their cash.
In its auction of the three Treasury Bills , short-term government securities, this week the National Treasury only accepted Sh16.6 billion against bids of Sh25.3 billion.
A week earlier, investors flush with cash responded warmly to the re-opened 20-year Treasury Bond, long-term government securities throwing a strong bid of Sh64.9 billion, a performance rate of 216.4 per cent. READ MORE
IMF to the rescue? State’s long dalliance with lender as economy limps through the years
However, the Central Bank of Kenya (CBK) which is the National Treasury’s fiscal agent, only accepted Sh19.7 billion, in what analysts say is informed by the fact that the Exchequer has already met its borrowing target for the current financial year ending this month.
“The government’s net domestic borrowing target of Sh521.9 billion, for financial (FY) 2020/21, has now been achieved with the borrowing of Sh521.7 billion,” said CBK in its weekly bulletin. Raphael Agung, Chief Economist at NCBA Bank, said Treasury is ahead of its borrowing target. “So they will only take what they had in plan,” said Agung.
At the beginning of the FY 2020-21, Treasury’s target for net domestic borrowing was Sh493.4 billion. However, with Treasury Cabinet Secretary Ukur Yatani surpassing target, he was forced to table a mini-budget to the National Assembly for approval on increased borrowing.
Mr Agung said the market is highly liquid, with investors, largely banks, looking for the safest place to channel the cash. “That liquidity is looking for a home,” said Agung, noting that the government security has a better risk-return profile.
Churchill Ogutu, head of research at Genghis Capital, an investment bank, said the rejection of the bids has translated into increased liquidity. “This high liquidity had a hand in the TAP sale announced this month with a quantum of Sh50 billion,” said Ogutu.
Much of this excess liquidity would have been channelled to the private sector, with banks lending more to firms and households.“The credit market has not opened up as quickly given the difficulty around the macro-economic environment in view of Covid-19 pandemic ,” said Agung.Despite low yields, with interest on […]