Interest rate on Kenya’s bonds hits three-year high

Yields on Kenya's government securities have hit a three-year high, offering foreign and local investors the best returns on investment in recent times.

central bank kenya
Central Bank of Kenya

The interest rate on the 91-day Treasury bill and a one-year Treasury bond stood at an average of 19 percent in this week’s auction, with investors rushing to cash in on the high yields.

central bank kenya
Central Bank of Kenya
Leading the surge was the 286 million U.S. dollars bond, which the government floated to raise money to support its budget.

The bond attracted an interest rate of 19.1 percent, with investors bringing in a massive 252.4 million dollars, according to the Central Bank of Kenya (CBK).

“The CBK offered a one-year bond for a total amount of up 286 million dollars. The total bids received were 984, amounting to 252.4 million dollars with the weighted average rate for successful bids standing at 19.06 percent,” CBK’s acting director of financial markets, John Birech, said Saturday in a brief on the auction.
Similarly, interest rate on the 91-day paper rose to 19 percent in this week’s auction, up from 15 percent in the previous week.

Yields on the T-bill have been on upward trajectory since the CBK raised its benchmark rate twice by 1.5 percent to a high 11.5 percent.

On Thursday, the regulator, who is seeking to mop up excess liquidity in the market to cushion the shilling from weakening against major world currencies, retained the lending rate at 11.5 percent, noting the fiscal policies it has put in place are working and inflation remains low, at about 6 percent.

The yields on the 91-day bill have risen from 8 percent in July to 12 percent at the end of August to 14 percent in mid-September to the current level. The CBK this week had offered bills worth 38.1 million dollars. The high yield attracted massive interest from investors as they sought to cash in on the offer.

The high performance of the 91-day bill and the one-year bond equally also affected trading from the Nairobi Securities Exchange (NSE).

“The NSE performance weakened in both equities and bonds segments during the week. The prices of quoted and actively traded shares recorded mixed performance with 0.01 percent increase in the Nairobi All Share Index and decline of 0.62 percent in NSE 20 Share Index,” said the CBK. Enditem

Source: Xinhua

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