Interbank Rate Spikes To 3.2% As 2014 Eurobond Remains Unchanged

The average interbank rate rose to 3.2 percent from 2.7 percent the previous week according to stats released by Cytonn Investments.

The average volumes traded in the interbank market rose by 12.2 percent to 14.8 billion shillings from 13.2 billion shillings the previous week.

The higher interbank rate points to tightening liquidity conditions experienced during the start of the week as the market recovered from tax payments due on 20^th of every month.

Despite the rise in the interbank rate, the money market remained relatively liquid with commercial banks recording excess reserves of 21.9 billion shillings in relation to the 5.25 percent cash reserves requirements (CRR).

Kenya Eurobonds

According to Bloomberg, the yields on the 5-year Eurobond issued in 2014 remained unchanged at 4.1 percent while the 10-year Eurobond declined by 0.3 percentage points to 7.0 percent from 7.3 percent the previous week.

Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 2.6 percentage points and 4.7 percentage points for the 10-year and 5-year Eurobonds respectively.

For the February 2018 Eurobond issue, during the week, the yields on both the 10-year and 30-year Eurobonds declined by 0.3 percentage points and 0.2 percentage points to 7.6 and 8.8 percent from 7.9 and 9.0 percent the previous week.

Since the issue date, the yield on the 10-year Eurobond has increased by 0.4 percent points while that of the 30-year Eurobonds has increased by 0.5 percent points.

The Kenyan Shilling

Last week, the Kenya Shilling appreciated by 0.6 percent against the US Dollar, to close at 101.1 shillings from 101.7 shillings recorded the previous week.

The Kenya Shilling has appreciated against the US Dollar by 0.7 percent year to date.

The shilling continues to enjoy the narrowing of the current account deficit to 5.3 percent in the 12-months to September 2018, from 6.5 percent in September 2017.

There have been improving diaspora remittances by 38.6 percent in 2018 to USD 2.7 billion from USD 1.9 billion recorded in 2017.

The CBK’s activities in the money market, such as repurchase agreements and selling of dollars will, according to analysts, shield the shilling.

There are high levels of forex reserves at USD 8.1 billion, equivalent to 5.3-months of import cover, compared to the one-year average of 5.1-months and above the EAC Region’s convergence criteria of 4.5-months of imports cover.