The subscription of Treasury bills fell from 55.3% to 53.5% as liquidity tightens. The slow uptake of short-term debt instruments is also because banks are looking to lend to the private sector after the rate cap repeal.
“The under subscription is attributable to reduced participation by banks who are now looking to lend to the private sector after the repeal of the rate cap legislation,” reads a Cytonn report.
Interbank rates on Friday rose to 5% from 2% last month. The elevation of the rates reduced the money supply available for investment into treasury bills.
The government is, therefore, likely to face short-term hitches in meeting its borrowing needs through T-bills. However, analysts expect banks to maintain their position in Treasury bills to provide a buffer in the balance sheets.
Analysts anticipated the slow T-bill uptake owing to changes in policy surrounding the interest rate cap. Before the rate cap repeals, T-bills were the most viable option for banks. However, they now have opportunities to earn higher returns from the private sector.
We expect subdued trading sessions in the week with most of the institutional investors taking a back seat. The market is anticipating a tap sale following the rejection of the 9.73.
Churchill Ogutu, Genghis Capital