Liquidity Levels Dip During Last Week as Interbank Rate Increases

Liquidity levels declined in the money market as indicated by the increase in the average interbank rate to 4.84 percent from 4.75 percent recorded the previous week.

The dip in the liquidity levels, according to Cytonn Investments, follows net payments for government securities and tax remittances by banks.

There was an increase in the average volumes traded in the interbank market by 7.2 percent to 14.8 billion shillings from 13.8 billion shillings the previous week.

During the month, the Kenyan Government re-opened two bonds, FXD 1/2008/15 and FXD 1/2018/20, with 4.9 years and 19.9 years to maturity, and coupons of 12.5 percent and 13.2 percent respectively.

The two bonds were in a bid to raise 40.0 billion shillings for budgetary support. The overall subscription rate for the issue came in at 81.9 percent with the market-weighted average bid rates coming in at 12.3 and 13.3 percent respectively.

The government accepted only 26.9 billion shillings of the 32.8 billion shillings worth of bids received, translating to an acceptance rate of 82.2 percent.

“We do not expect the government to come under pressure to borrow for the current fiscal year given they are ahead of their domestic borrowing target and have also borrowed approximately 86.1 percent of their pro-rated foreign borrowing target,” said experts from Cytonn.

The yields on government securities in the secondary market remained relatively stable during the month as Central Bank continues to reject expensive bids in the primary market. According to the FTSE NSE Bond Index, Treasury bonds listed at the Nairobi Securities Exchange (NSE) gained 1.4 percent during the month, bringing the YTD performance to 4.0 percent.