T-bill yield up, threatens banks’ deposits

THE 364 Treasury bill is becoming the darling of investors thanks to its return on investment which poses a stiff challenge to banks’ deposits.

The one-year yield kept on increasing after last week and went up by 48 basis points growing from 6.74per cent last month to 7.22 per cent in the mid-last week auction.

Exodus Chief Executive Officer Ramadhan Kagwandi said yesterday that while the 364 days bill was oversubscribed by 96.58 per cent its junior bills were either under or not subscribed at all.

“This continues to indicate the higher demand for the 364 days tenor,” Mr Kagwandi said in the firm’s week market highlight report.

Although, the 182 days were undersubscribed its yield grew by 40 basis points to 5.40 per cent from 5.0 per cent in the last auction.

The 182 bill was undersubscribed by almost half after investors bid 38bn/- out of the amount of 69.9bn/- offered by the central bank.

The trend was similar to 91 days bill that was poorly subscribed after investors tendered 2.2bn/- against 19.9bn/- the central bank sought to raise from the public.

“There were no tenders for the 35 days Treasury bills while the 91 days and 182 days were undersubscribed,” Exodus CEO said.

Orbit Securities Investment Analyst, Ammi Julian, warned the upward movement in Treasury bills’ yields has implications for commercial banks’ deposits.

“As the yields on Treasury bills increase, they become more attractive to investors seeking higher returns on their investments.

“This may prompt some individuals to withdraw their funds from fixed deposit or savings accounts and instead invest in Treasury bills, which offer the potential for higher interest rates,” Mr Julian said in Orbit’s synopsis.

Vertex International Securities said in its weekly market review that the bills auction results came as per their prediction.

“The Treasury bill auction results echoed our last week’s predictions as yields increased,” Vertex report said adding “We forecast the upcoming 10-year Treasury bond auction to slightly underperform”.

Zan Securities said in its weekly market wrap up that the 35-day maturity bill did not receive any subscriptions this time, despite being oversubscribed in the previous auction.

“This inconsistency in demand over the last three auctions suggests mixed market signals,” Zan said.

Additionally, the 91-day maturity bill received subscriptions for only 11 per cent of the offered amount, while the 182-day bill garnered 54 per cent of subscriptions.

“In the previous auction,” Zan report said, “neither of these maturities received any bids”.

However, Zan report indicated they anticipate a forthcoming shift in investor preferences towards fixed-income securities as several counters enter the ex-dividend period.

“The market outlook for the coming weeks appears cautiously positive,” Zan said.