T-bill rates invert as bidders go short term

The yield on the 91-day Treasury Bill has raced ahead of the 182-day T-bill on account of high demand for the shorter duration from investors in recent auctions.

The rare inversion on the shortest end of the government’s yield curve leaves the Treasury facing elevated finance costs in the short term, given that the performance levels of the 91-day have outstripped the six-month and one-year papers.

Read: CBK bans cash, cheque payment for bonds, T-bills

The rate on the 91-day T-bill has jumped to its highest level since November 2015, while those on the 182 and 364-day papers are at levels last seen in February 2016.

In last week’s auction, the interest rate on the 91-day T-bill rose by 33 basis points to 12.68 percent, while the rate on the 182-day rose by 16 basis points to 12.55 percent. On the one-year paper, the rate rose by 38 basis points to 13.1 percent.

“Despite low demand for the one-year paper the rates have been rising due to investors looking for a premium to protect their real rate of return following increased concerns on the government’s debt distress position,” said Solomon Kariuki, an analyst at AIB AXYS Africa.

“We expect investors to continue being aggressive across all issuances at least until the government handles the 2024 Eurobond maturity. Investor aggressive bidding is also driven by the tough prevailing macro factors which have the government desperate for debt and investors taking advantage by asking for the premium.”

According to analysts, the return on government paper will continue to rise from a combination of factors, including inflation and increased domestic financing requirements for the government

Read: Interest on 182-day T-bill crosses 11 percent mark

The hike of the base rate to 10.5 percent from 9.5 percent in a surprise June Monetary policy committee meeting also signalled higher rates to the market.

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