Investors particularly banks and Insurance companies have flooded the Treasury bill auction with billions of shillings forcing down the price at which the government borrows.
While the 182-day Treasury bill (T-Bill) was trading at an average 6.74 on Wednesday down from an average of 15 in the past one year that of 364-day Treasury bill was trading at an average of 13.59 on Wednesday.
Analysts say the rush by banks to government securities is a result of refraining to lend the more risky and unpredictable businesses sector.
“It is obvious that banks will from now on rush to invest in risk free government securities than lend the private sector which its performance is not predictable especially this year when the country is threatened by drought,” said an analyst.
According to figures from the central bank the 182-day and 364-day Treasury bill was oversubscribed by 108 per cent. The government intended to borrow Sh59 billion but investors tendered as high as Sh122.73 billion.
On other hand the government offered Sh75.5 billion on the 364-day Treasury bill but subscribers tendered a whooping Sh261.34 billion.
Yields on 182-day and 364-day T-bills were then on the rise to 14.49 per cent and 15.77 per cent.
Investing in Treasury bills is the process of lending money to the government, with the intention of re-collecting it with interest usually within a year.
Generally in investment circles, investing in government treasury bills (T’bills as they are popularly called) is considered as the safest form of investment one can make on the market. This is because unless the country collapses totally, your money (principal) will definitely be paid back to you with the promised interest, irrespective of which government is in power.
Treasury bills are usually issued over 3 time periods: 91-day bill, 182-day bill and 1 year note.
Among the advantages of investing in Treasury bills is that it is considered to have little or practically no risk attached. All things being equal, you will definitely get your money back with the promised interest