Investors flock Kenya’s debt market as yields rise

central bank kenya
Central Bank of Kenya

An increase in interest rates on Kenya’s short-term government securities has made investors troop back to the debt market.

central bank kenya
Central Bank of Kenya
Yields have risen to a high of between 11 and 13 percent from 8 to 11 percent in the last one month following the raising of the Central Bank of Kenya (CBK) indicative rate.

The apex bank raised its benchmark interest rate by 1.5 percent in each of its two past meetings to stand at 11.5 percent in bid to save the local currency, the shilling, from weakening against the major world currencies.
The high interest rate is also to help the bank mop up cash from the market through the sale of Treasury bills and bonds.

Yield on the 91-day Treasury bill in this week’s auction stood at 11.57 percent, up from 11.55 percent the previous week.

Last month, interest rates on the bills stood at 8 percent, making them unattractive.
Similarly, yields on the 182-day and 364-day bills remain high, standing at 11.8 percent and 13.1 percent respectively.

The high rates have attracted investors back to the debt market whose offers initially were heavily undersubscribed.

This week, investors mostly went for the 364-day bill whose yield so far is the highest. The CBK put on sale bills worth 40 million dollars and received an overwhelming response.

“The total bids received were 80 amounting to 69 million dollars representing a 174 percent subscription. The bids accepted amounted to 51 million dollars,” Irene Njiru, the manager financial markets at the CBK said in a brief on Friday.

Following in performance was the 91-day bills. CBK put on sale bills worth 30 million dollars as in the previous week.

“The total number of bids received was 154 amounting to over 21 million dollars representing a subscription of 71.4 percent. The total bids accepted amounted to 7 million dollars,” said Njiru.

The subscription for the 364-day and 91-day bills is a great improvement from the previous weeks where performance had dropped to about 10 percent when interest rates were low.

Of the short-term papers, only the 182-day bill did not attract investors despite interest rates standing at 11.8 percent.

CBK put on sale bills worth 40 million dollars and received a subscription of 18 percent amounting to 2.1 million dollars.

In addition, the bank has re-opened a two-year Treasury bond worth over 198 million dollars whose yield stands at 13 percent as it seeks to cash in on increased demand. Enditem

Source: Xinhua

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