Investors’ appetite for the 364-day Treasury bill in the fiscal year 2025/2026 has increased, mainly driven by higher yields compared to 182- and 91-day papers.
According to last week’s auction, the 364-day paper interest rate stood at 9.54%, while the rates for 182- and 91-day papers were 8.01% and 7.97%, respectively.
In the current fiscal year, the one-year treasury bill has raised KES 120.8 billion, compared to KES 66.8 billion for the 182-day T-bill and KES 83.4 billion in the 91-day T-bill.
Investors speculate that the Central Bank Rate (CBR) may continue to fall as a result of the CBK’s initiative to support private sector lending, hence avoid crowding out of the sector.. Currently, the CBR is 9.5%. Additionally, the apex bank seeks to lower the cost of domestic financing, a key factor that has also led to the decline in T-bill rates.
The 364-day paper’s interest rate has fallen by 7.36% to 9.54% from 16.9% in August 2024. The 182-day paper rate has halved to 8.01% from 16.7%, while the 91-day rate has declined by 7.83% to 7.97%.
Last week’s T-bill auction
In last week’s auction, the 364-day treasury bill was oversubscribed at a performance rate of 202.3%. The paper received bids amounting to KES 20.2 billion, out of which KES 11.1 billion was accepted. Similarly, the 91-day paper, which offered KES 10 billion, recorded an oversubscription. The paper posted a 385.2% performance rate, with the CBK accepting KES 14.7 billion out of bids totaling KES 15.4 billion. Investors showed little interest in the 182-day paper. Bids amounted to KES 3.1 billion out of the KES 10 billion offered. The apex bank accepted all bids.
Investing in 364-day T-bills enables investors to lock in higher returns for longer, especially when interest rates are expected to fall in the future. Conversely, when investors are optimistic about the interest rates, they invest in 91-day papers for easy pivoting to papers with high returns in the future.
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