Interbank Rate Marginally Spikes During The Week As Shilling Stabilizes

The average interbank rate increased marginally to 3.7 percent last week from 3.5 percent the previous week according to a report released by Cytonn Investments.

The average volumes traded in the interbank market increased by 18.2 percent to 15.4 billion shillings from 13.0 billion shillings the previous week.

The increase in the interbank rate points to tighter liquidity conditions, attributed to banks trading at higher interest rates.

Kenya Eurobonds

According to Bloomberg, the yields on the 10-year and 5-year Eurobonds issued in 2014 declined by 0.1 percent points and 0.2 percent points to 7.2 percent and 4.3 percent from 7.3 percent and 4.5 percent the previous week respectively.

Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 2.4 percent points and 4.5 percent points for the 10-year and 5-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country.

Key to note is that these bonds have 0.7 years and 5.7 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 declined by 0.1 percent points and 0.2 percent points to 8.0 percent and 8.9 percent from 8.1 percent and 9.1 percent the previous week, respectively.

Since the issue date, the yields on the 10-year and 30-year Eurobonds have both increased by 0.7 percent and 0.6 percent points, respectively.

Kenyan Shilling

During the week, the Kenya Shilling remained stable against the US Dollar, depreciating marginally by 0.1 percent from 100.9 shillings to 101.0 shillings due to demand from merchant importers matching supply from diaspora remittances.

The Kenya Shilling has appreciated by 2.1 percent on a year to date, and in Cytonn analysts’ view the shilling should remain relatively stable to the dollar in the short term the narrowing of the current account deficit to 5.8 percent in the 12-months to June 2018, from 6.3 percent in March 2018.