During the week, market liquidity tightened with the average interbank rate increasing to 3.9 percent from 3.2 percent recorded the previous week, attributable to tax remittances due on the 20th of every month.
The week also saw the average interbank volumes increase by 132.6 percent to 8.9 billion shillings, from 3.8 billion shillings recorded the previous week.
According to the Central Bank of Kenya, commercial banks’ excess reserves came in at 41.1 billion shillings in relation to the 4.25 percent cash CRR.
The favorable liquidity since March 2020 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 Monetary Policy Committee in its meeting held on 25th June 2020 revealed that 87.6 percent of the funds have been used for onward lending especially to support the tourism, transport & communication, real estate, and manufacturing sectors.
Investor sentiments have been improving over the past two months as the market reacted to the news by the World Bank having approved USD 1.0 bn funding to support the economy as well as the Rapid Credit Facility (RCF).
The move by World Bank reaffirmed investors’ confidence despite the recent downgrade by Moody’s where Kenya’s sovereign credit outlook was changed to negative from stable.
According to Reuters, the yield on the 10-year Eurobond issued in June 2014 remained unchanged at 6.4 percent for the week.
The yields on the 10-year Eurobond issued in 2018 remained unchanged at 7.5 percent similar to what was recorded the previous week.
The yield on the 30-year Eurobonds issued in 2018 declined by 0.2 percentage points to 8.3 percent from 8.5 percent recorded the previous week.
The yields on the 7-year Eurobond issued in 2019 increased by 0.1 percentage points to 7.3 percent from 7.2 percent recorded the previous week.
The yield on the 12-year Eurobonds issued in 2019 declined by 0.1 percentage points to 8.1 percent from 8.2 percent recorded the previous week, respectively.