Treasury bills auction bullish, signals return of investor confidence
By Noel.Wandera, April 18, 2023
MARKET: Treasury bills auction last week was bullish, with bids worth Sh29.4 billion realised against an advertised amount of Sh24 billion, representing a performance of 122.6 per cent and signaling investor confidence.
According to the Central Bank of Kenya’s (CBK) weekly bulletin, interest rates on the T-bills remained stable, with 91-day, 182-day and 364-day rates increasing marginally.
This, even as it said turnover in the domestic bond market last week was bearish, declining by 38.8 per cent, while yields on Kenya’s Eurobonds increased by an average of 24.4 basis points, with 2024 maturity increasing by 46.1 basis points.
The government normally turns to the domestic market to raise money and finance large capital projects like construction of roads and fund its daily operations. Out of the Sh4.5 trillion out of borrowed, 14.66 per cent was in T-bills while 82.9 per cent invested in treasury bonds.
However, authorities are caught between a rock and a hard place on whether to finance its recurrent expenditure, development projects or re-finance its debt.
Kenya’s 2023 medium term debt management strategy indicates there are heavy maturities of domestic debt in 2023 that are putting pressure on government revenues.
“The maturity of domestic debt is highest in 2023 majorly due to maturing short-term government securities. The repayment structure is relatively smooth, except for spikes in 2023, 2024 and 2028 due to maturities of international sovereign bond,” the debt management strategy reports notes in part.
Tax revenue
David Ndii, chair of Presidential Council of Economic Advisors said: “Over 63 per cent of our tax revenue goes to debt repayment. The implication is that you will have liquidity shocks because it is very precarious.”
Financial research firm Mwango Capital, in its weekly newsletter also notes that nine listed Kenyan lenders have the highest exposure to government debt and any default on internal debt could occasion haircuts.