Interbank Rates Declines To 7% As Eurobond Yield Continues to Rise

The average interbank rate declined to 7.0 percent from 8.3 percent the previous week while the average volumes traded in the interbank market declined by 20.6 percent to 9.1 billion shillings from 11.4 billion shillings the previous week.

The decline in the average interbank rate points to improved liquidity, which the Central Bank of Kenya has attributed to reduced pressure due to the fact banks had attained the average monthly Cash Reserve Requirements threshold towards the end of the cycle on August 14th, 2018.

Kenya Eurobonds:

According to Bloomberg, the yield on the 5-Year and 10-year Eurobonds issued in 2014 increased by 0.3 percent points and 0.4 percent points to 4.7 percent and 7.2 percent from 4.4 percent and 6.8 percent the previous week respectively.

Since the mid-January 2016 peak, yields on the Kenya Eurobonds have declined by 4.1 percent points and 2.4 percent points for the 5-year and 10-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country.

Key to note is that these bonds have 1-year and 6-years to maturity for the 5-year and 10-year, respectively.

For the February 2018 Eurobond issue, during the week, the yields on both the 10-year and 30-year Eurobonds increased by 0.2 percent points and 0.1 percent points to 7.8 percent and 8.7 percent from 7.6 percent and 8.6 percent the previous week respectively.

Since the issue date, the yields on the 10-year and 30-year Eurobonds have increased by 0.5 percent points and 0.4 percent points respectively.

Key to note is that yields on all the Eurobond issues continued to rise last week reflecting the general trend in the international bond market, which the Central Bank of Kenya attributed to the adjustments of global yields to normalization of monetary policies in the advanced economies.

This information has been extracted from the weekly Cytonn Report.