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T-bills now 17.1pc of State securities debt
The stock of T-bills, excluding repurchase agreements, stood at an all-time high of Sh1.184 trillion as at March 13, while outstanding Treasury bonds were valued at Sh5.739 trillion.
The share of government securities in the form of Treasury bills has climbed to a four-year high following the recent rush for the one-year paper amid high liquidity in the money market.
Latest data from the Central Bank of Kenya (CBK) —the government’s fiscal agent— shows that Treasury bills now account for 17.1 percent of the total securities in issue, the highest share since February 2022. Treasury bonds account for 82.9 percent of the outstanding securities.
The stock of T-bills, excluding repurchase agreements, stood at an all-time high of Sh1.184 trillion as at March 13, while outstanding Treasury bonds were valued at Sh5.739 trillion.
The combined value of these securities represents 98.2 percent of the government’s total domestic debt of Sh7.12 trillion. Other items on the debt portfolio include the Treasury’s rolling overdraft from CBK (Sh88.9 billion), on-lent IMF funds from CBK (Sh79.5 billion) and other domestic debt including advances from commercial banks (Sh108.3 billion).
Treasury bills and bonds however remain the government’s biggest borrowing instruments in the domestic market. Ideally, the Treasury looks to keep the share of borrowing under T-bills low to avoid short-term refinancing pressure.
Recent T-bill auctions have however been oversubscribed, pushing the ratio higher despite the CBK’s efforts to lengthen the domestic debt maturity profile by selling a series of long term bonds, which have also been oversubscribed.
“From the domestic sources, the strategy is to gradually reduce the stock of Treasury bills while lengthening debt maturity and issuance of medium to long term debt securities,” said the Treasury in its medium term debt management strategy covering the 2026/27 to 2028/29 fiscal years.
The share of T-bills in the government securities had fallen from highs of 38.4 percent in November 2018 to a low of 11.4 percent in December 2023.
The short term securities have however been growing in prominence in the last two years, partly as a result of the government issuing short dated debt in order to avoid prolonged exposure to the high interest rates seen throughout 2024 and early 2025.
With interest rates now firmly on a downward trend, the CBK has been issuing longer dated bonds of up to 25 years in order to return to its goal of lengthening the debt maturity profile.
At the same time however, investors have pumped in billions into the one-year T-bill this year, looking to lock in its relatively higher rates (compared to the three and six month papers) before returns decline further.
In February, the one-year T-bill rate was higher than the other two papers by a margin of 1.57 percentage points, although it has since then come down to 0.86 percentage points.
Due to the return premium, bidding in the period was heavily skewed towards the one-year paper, coinciding with a period of high liquidity in the market which saw investors offer the government a total of Sh459.2 billion in the T-bills auctions held between January 29 and March 12.
The 364-day T-bill accounted for 77.4 percent or Sh355.6 billion out of these offers, but the CBK rejected Sh152.4 billion in a bid to force the rate on the paper down and avoid a refinancing headache when the debt falls due in a year’s time.
