During the week, liquidity remained high in the money market with the average interbank rate remaining unchanged at 4.2 percent, following the end of the monthly Cash Reserve Requirement (CRR) cycle and support from government payments.
The average interbank volumes declined by 11.2 percent to 11.5 billion shillings, from 12.9 billion shillings recorded the previous week.
The favorable liquidity in recent weeks has also partly been attributable to the reduction of the Cash Reserve Ratio (CRR) to 4.25 percent, from 5.25 percent previously, by the Monetary Policy Committee (MPC) during its March 2020 sitting.
The MPC freed up 35.2 billion shillings to provide additional liquidity to commercial banks for onward lending to distressed borrowers during the COVID-19 pandemic. Commercial banks’ excess reserves came in at 38.9 billion shillings in relation to the 4.25 percent cash CRR.
Kenya Eurobonds:
During the week, the yields on all the Eurobonds declined owing to improved investor sentiments as the market reacted to the news by the World Bank that they had approved USD 1.0 bn funding to support the economy.
According to Reuters, the yields on the 10-year Eurobond issued in June 2014 declined by 1.4 percentage points to 8.0 percent, from 9.4 percent recorded the previous week.
During the week, the yields on the 10-year and 30-year Eurobonds issued in 2018 declined by 1.1 percentage points and 0.6 percentage points to 8.2 and 8.8 percent, respectively, from 9.3 and 9.4 percent recorded previous week, respectively.
During the week, the yields on the 7-year and 12-year Eurobonds issued in 2019 declined by 1.1 percentage points and 0.8 percentage points, to 8.1 and 8.8 percent respectively, from 9.2 and 9.6 percent recorded the previous week, respectively.