Interbank Rate Up By 0.2 Percent To Close At 7.2 Percent

Last week saw the average interbank rate slightly increasing by 0.2 percent to 7.2 percent from 7.0 percent recorded the previous week.

The slight increase in the interbank rate was attributed to the relatively tight liquidity conditions in the money markets during the week.

The relatively tight liquidity conditions in the money markets has been attributed to the cyclical liquidity tightness due to the start of the new CRR cycle.

Last week, the commercial banks’ excess reserves came in at 16.4 billion shillings compared to 11.5 billion shillings recorded the previous week in relation to the monthly 5.25 percent cash reserve requirement.

The average volumes traded in the interbank market increased by 13.0 percent to 6.0 billion shillings from 5.3 billion shillings recorded the previous week.

Kenyan Eurobonds

According to an analysis by Reuters, the yield on the 10-year Eurobond issued in 2014 declined by 0.2 percentage points to 5.4 percent from 5.6 percent recorded the previous week.

“We attribute the decline across all Kenya Eurobonds to easing risk concerns over the economy by investors following the news of a likelihood of the interest cap repeal, which is seen as likely to stimulate credit growth and the economy,” said analysts from Cytonn Investments.

For the Eurobond issued in 2018, the yields on the 10-year and 30-year Eurobonds declined by 0.3 and 0.2 percentage points to 6.5 and 7.9 percent respectively from 6.8 and 8.1 percent recorded the previous week.

Last week, the yields on both the 7-year Eurobond and the 12-year Eurobond declined by 0.1 and 0.2 percentage points to come in at 6.3 and 7.2 percent from 6.4 and 7.4 percent recorded the previous week respectively.

Interest Rate Cap Repeal

Last week, President Uhuru Kenyatta refused to sign the Finance Bill that had been presented before him and returned it to parliament proposing the removal of the interest rate cap.

According to President Uhuru Kenyatta, the interest rate cap has affected the credit in the country hence impacting negatively to the economy.