The average interbank rate increased to 7.5 percent last week from 5.9 percent the previous week according to a weekly report from Cytonn Investments.
The average volumes traded in the interbank market decreased by 42.3 percent to 13.0 billion shillings, from 22.6 billion shillings the previous week. The higher interbank rate points to tighter liquidity, mainly attributed to aggressive activities by the Central Bank of Kenya (CBK) to mop up liquidity through its open market operations, in a bid to protect the shilling.
The yields on the 5-year and 10-year Eurobonds issued in 2014 both declined by 0.1 percentage points to 5.2 percent and 8.1 percent from 5.3 percent and 8.2 percent recorded the previous week, respectively.
Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 1.5 percentage points and 3.6 percentage points for the 10-year and 5-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country. The bonds have 0.5-years and 5.6-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 remained unchanged at 8.9 percent and 9.6 percent, respectively. Since the issue date, the yields on the 10-year and 30-year Eurobonds have both increased by 1.6 percent and 1.3 percentage points, respectively.
Key to note however, yields in Eurobonds issued in the Sub-Saharan Region have been on the rise on a Year to date basis, signaling higher risk perception by investors. This has partly been attributed to the increment in the Federal Rate twice this year, currently at 2.0 – 2.25 percent which has led to a market correction in Eurobond yields in the emerging markets in the wake of rising US Treasury yields and a stronger dollar.