Investors pick safety of cash over returns

Investors with substantial liquidity have opted to put their money in government debt despite diminishing returns, with the latest 91-day Treasury bill offer oversubscribed by more than three times.

This week, Central Bank of Kenya (CBK), the fiscal agent for National Treasury, received bids worth Sh13.4 billion for the three-month government paper. This was against an offer of Sh4 billion.

The high subscription comes against a backdrop of declining yields, an indicator that investors are after the security offered by government securities more than returns.

Investors will get a return of 7.089 per cent on the T-bill compared to 7.25 per cent that was given for the 91-day paper auctioned last week.

Various asset classes have been ravaged by the uncertainty of the Covid-19 pandemic, with many investors fearing to burn their fingers.

Another Treasury bill that was oversubscribed was the 364-day paper, which attracted bids of Sh18.8 billion against an offer of Sh10 billion. Treasury will pay 8.66 per cent for this paper.

The subscription for the three short term papers - 91, 182 and 364 days - was 188 per cent with the six-month bill receiving the lowest subscription of 130 per cent.

Also this week, the five and 10-year Treasury bonds that CBK re-opened were oversubscribed by 262 per cent as liquid investors sought to put their money in secure investments.

Five and 10-year Treasury bonds that CBK offered got total bids of Sh105 billion against the government’s offer of Sh40 billion as liquid investors sought the safety haven of government debt.

The five-year bond with a maturity date of December 9, 2024 received bids worth Sh60.9 billion while the 10-year bond attracted total bids of Sh44.2 billion.

Close to half of the bids, Sh49 billion, were accepted with the government expected to pay an interest of 11.49 per cent for the five-year T-bond and 12.28 for the 10-year bond that will mature in November 12, 2029.

CBK data shows investors, particularly banks, have been swimming in cash most of it from settlement of pending bills by State corporations, VAT refunds and interest payments on domestic debt.