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Treasury bills share of domestic debt rises to 15 percent
CBK is expected to find more success in lengthening the government securities yield curve as interest rates continue to fall, restoring the historical mix between Treasury bills and bonds.
Treasury bills as a share of domestic debt hit a near-two year high of 15.02 percent at the end of February, mirroring the rise of short-term papers in government financing over the past year.
The share of T-bills as a percentage of total securities issues has grown from a low 11.35 percent at the end of December 2023.
The stock of Treasury bills, excluding repurchase agreements, stood at Sh886.8 billion as of February 28 from Sh546.9 billion at the end of 2023 according to data from the Central Bank of Kenya (CBK).
In contrast, the share of Treasury bonds to total securities has eased slightly to 84.98 percent from 88.65 percent over the same period even as the value of the outstanding long-term securities grows to Sh5.01 trillion from Sh4.27 trillion.
The rise of Treasury bills as a portion of securities issued as debt is partly attributable to the issuance of short-term securities during the time of high interest rates as the government sought to avoid incurring heavy interest costs for a prolonged period.
This saw the CBK cut its issuance of Treasury bonds, particularly papers with long tenors in favour of the fast-maturing securities.
“The surge in the share of Treasury bills ties directly to the high-interest rate storm that we are now emerging from -an environment that crowned short-term securities as both alluring and less perilous, thanks to their tenors,” said Standard Investment Bank senior research associate Stellar Swakei.
The CBK avoided issuing long-term bonds last year as domestic interest soared with the 364-day T-bill peaking at a high of 16.9899 percent in March last year.
Lower inflation and exchange rate stability in recent months has however reset local rates as yields on both T-bills and bonds fall presenting the CBK with the opportunity to re-issue longer-term papers.
Investors have begun adjusting to the falling rates, registering a subscription rate of 188.05 percent on a re-opened 25-year bond this month which has a lengthy 18.3 years’ time to maturity.
The paper helped the CBK raise Sh35.2 billion against a target of Sh25 billion after Sh47 billion investor bids.
CBK is expected to find more success in lengthening the government securities yield curve as interest rates continue to fall, restoring the historical mix between Treasury bills and bonds.
“As short-term risks dissipate and interest rates ease, this tilt might settle back to historical norms --though much depends on the robust showing of Treasury bonds and their maturity amounts. A wave of maturing bonds could trim their outstanding totals, potentially boosting the Treasury bills' slice of the pie even further,” added Ms Swakei.
