Liquidity in the money markets eased during the month of May with the average interbank rate declining to 4.1 percent from 5.3 percent recorded in April.
The easing of Lliquity in May was supported by government payments and tax refunds done during the month, and 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 reduction in (CRR) freed up 35.2 billion shillings to provide additional liquidity to commercial banks for onward lending to distressed borrowers during the COVID-19 pandemic.
During the week, the average interbank rate declined to 3.5 percent from 4.2 percent recorded the previous week, due to increased liquidity in the money markets due to pending bill payments and tax refunds.
The average interbank volumes rose by 80.4 percent to 20.7 billion shillings from 11.5 billion shillings recorded the previous week.
According to Reuters, the yield on the 10-year Eurobond issued in June 2014 declined by 1.5 percentage points to 8.0 percent in May, from 9.5 percent in April.
During the week, the yield on the 10-year Eurobond remained unchanged at 8.0 percent, similar to what was recorded the previous week. Notably, all the Eurobond’s yields declined significantly in May.
The performance was mainly driven by improved investor sentiments as the market reacted to the news by the World Bank that they had approved USD 1.0 billion funding to support the economy as well as the Rapid Credit Facility (RCF) which reaffirmed investors’ confidence despite the recent downgrade by Moody’s where Kenya’s sovereign credit outlook was changed to negative from stable.
During the month, the yields on the 10 and 30 year Eurobonds issued in February 2018 declined by 1.1 percent points and 0.5 percentage points to close at 8.0 percent and 8.8 percent respectively, from 9.1 percent and 9.3 percent in April.
During the week, the yield on the 10-year Eurobond declined by 0.2 percentage points to close at 8.0 percent from 8.2 percent recorded the previous week. The 30-year Eurobond remained unchanged at 8.8 percent similar to what was recorded the previous week.
During the month, the yields on the newly issued dual-tranche Eurobond with 7-years declined by 1.2 percentage points to 8.1 percent from 9.3 percent in April.
The 12-year Eurobond decreased by 0.8 percentage points to 8.6 percent from 9.4 percent in April. During the week, the yields on the 7-year remained unchanged at 8.1 percent while that of the 12-year Eurobond declined by 0.2 percentage points to 8.6 percent from 8.8 percent recorded the previous week.