The Treasury bills auction was undersubscribed for an eighth straight week, with investors firmly eyeing the bonds market in search of higher returns.

The Central Bank of Kenya (CBK) said that last week’s auction, which targeted Sh24 billion saw bids worth Sh15.6 billion across all three tenors, with the government taking up Sh10.7 billion as the regulator rejected expensive bids.

Interest rates went up by between 5.4 and 9.1 basis points as a result of the sub-par bid levels, to 6.4, 6.84 and 7.74 percent for the 91-day, 182-day and 364-day papers respectively.

“The 91-day paper was the most subscribed paper as investors sought to hedge reinvestment risk and manage liquidity,” said KCB Capital in a market note.

Investors bid Sh6.2 billion on the Sh4-billion 91-day T-bill, while under subscribing the 182 and 364-day offers which sought Sh10 billion each, offering Sh4.1 billion and Sh5.3 billion respectively.

Although market liquidity was on the up last week, it has reduced significantly compared to a few weeks ago, when a flush market supported heavy bidding for both T-bills and bonds.