Liquidity to spur Kenya's T-bills as Nigerian bond yields fall

The Central Bank is expected to sell Treasury bills of all maturities worth Sh12 billion, the usual amount, at two separate auctions.

Nairobi; Kenya: Demand for Kenya’s Treasury bills is likely to rise at this week’s sale as investors seek new berths for their funds after more than half their bids for an infrastructure bond were rejected. The Central Bank accepted only Sh16 billion of bids for the 12-year infrastructure bond it sold on October 22, out of bids totalling 39 billion shillings ($437 million).

“That money (rejected bids) will be chasing securities,” said Sammy Maikweki, a fixed-income trader at Sterling Investment Bank.

The Central Bank will sell Treasury bills of all maturities worth Sh12 billion, the usual amount, at two separate auctions. However, the regular T-bills do not offer the tax break which added to the appeal of the infrastructure bond. Traders said yields on the bills could remain stable.

In Nigeria, increased demand for Government bonds from local pension funds last week buoyed debt note prices after four weeks when falling global oil prices and a rapid decline in the value of the naira currency had forced offshore investors to gradually exit.

Traders said most offshore investors stayed on the sidelines this week, while the pension funds took the front seat in the local debt market of Africa’s biggest economy.

“The offshore investors might further cut back on their bond holdings as we gradually approach the year end, but this will depend on the broader outlook for the local economy and the performance of global oil prices,” another dealer said.

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The naira currency weakened to 166.15 to the dollar on Thursday, hovering around a 7-month low before the Central Bank intervened by selling an undisclosed amount of dollars in the market, strengthening it to 164.70 to the dollar on Friday.

Yields on the benchmark 2024 bond fell 19 basis points to 12.62 per cent on Friday, against 12.81 per cent last week. The 2022 paper traded at 12.66 per cent, down from 12.88 per cent last Friday.

“The market experienced increase in local demand for bonds this week, due largely to improved liquidity and a slowdown in the sell-off of offshore investors,” one dealer said.