Tea prices at last week’s Mombasa tea auction showed a 4.90 percent price increment to a three-month high of 300 shillings per kilogram.
At the auction, 13,580 packages (1,121,368 kilograms) representing 9.86 percent of the total 137,700 packages (8,900,000 kilograms) on offer remained unsold. Demand was majorly from Egypt while there was an increase from UK, Pakistan, and Afghanistan.
Quantities at the forthcoming auctions this week and next week will be capped at 131,876 and 130,856 packages, respectively. Tea production for 2017 is expected to drop by 11% on account of the drought conditions which will support the elevation of tea prices.
The market continued to lean heavily on the short end of the yield curve with mounting uncertainty as we approach fiscal year end. Longer term investors still remain bid on long-term tenors at levels of 13.10 – 13.30 percent and we do not expect to cross the psychological level of 13 percent in the remaining part of this FY.
On the other hand, the secondary market turnover dropped to 1.9 billion shillings driven by trades on the FXD1/2009/15 at levels of 12.80 percent. Activity is expected to contract further as this month’s auction draws nearer. The local unit remains resilient and we expect it to trade range bound at 103.10 -103.50 up until the end of FY2016/17.