T-bill yields drop sharply as Kenya cuts domestic borrowing

Yields on Kenya's Treasury bills have fallen sharply as the government cuts borrowing from the domestic market and seeks to push down rising interest rates.


The rates, which had risen to a three-year high of 23 percent as the Kenya government sought to stabilise a weakening shilling by mopping-up excess liquidity from the market and raise money to finance its budgets, fell by up to 6 percent for the second consecutive week.


The worst hit was the 91-day Treasury bill, whose yield fell by 5.7 percent to stand at 13.8 percent, from a high of 23 percent last month.

The total decline on the bill’s yields in two weeks now stand at 8.7 percent, having dropped by 3 percent to 19.5 percent in the auction dated Nov. 2.

The 182-day bill, on the other hand, this week shed off over 4.5 percent to stand at 16.5 percent from 21 percent last week.

This was a continuation of a downward trend, having lost 1.3 percentage points in the auction dated November 2 where the yields stood at 22.3 percent.

Similarly, interest rate on the 364-day bill dropped 4.1 percent this week to settle at 17.1 percent. Last week, the 364-day bill dropped 1.2 percentage points to stand at 21.2 percent from 22.4 percent.

As last week, the drop in earnings for the three government papers did not dissuade investors from buying the securities as they rushed to cash in before the rates dropped further.

However, despite the rush, the Central Bank of Kenya (CBK) just took a fraction of the bids received showing that the government is not keen on borrowing much from the public, which is expensive.

The CBK had floated 91-day, 182-day and 364-day bills worth 40 million dollars each. The 91-day and the 364-day bills were the best performers in this week’s auctions.

“The total number of bids received for the 91-day bill was 500 amounting to over 427 million U.S. dollars representing a subscription of 1,115 percent. The number of bids accepted was 72 million dollars,” said CBK’s Acting Director of Financial Markets John Birech Friday.

In last week’s auction, the total number of bids received by the bank was 686 amounting to over 327 million dollars representing a subscription of 826 percent. The total number of bids accepted was 68.4 million dollars
For the 182 and 364 days bills respectively, the bank in this week’s auction received bids amounting to 322 million dollars representing an 822 percent subscription and 493 million dollars representing a 1,258 percent subscription.

“Bids accepted amounted to 55.4 million dollars for 182-day and 88 million dollars for 364-day Treasury bills respectively,” said Birech.

Last week, for the 182 and 364 days bills respectively, the bank received bids amounting to 190 million dollars representing a 480 percent subscription and 405 million dollars representing a 1,023 percent subscription.

The CBK accepted bids amounting to 55.4 million dollars for the 182-day bills and 70 million dollars for the 364-day bills.

Analysts note that the yields would fall below the 10 percent mark in coming auctions as the Central Bank has achieved its objective of stabilising the shilling and is, thus, keen on lowering lending rates. Enditem

Source: Xinhua

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