Liquidity conditions reversed the previous week’s posture, as the cost of funds in the money market notched higher to an average of 12.17%, from 12.10% recorded the previous week.
The performance followed an increase in settlements that offset government receipts. Consequently, the average traded volumes fell 8.57% to KES 24.03bn from KES 26.28bn a week earlier.
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The Central Bank injected KES 70.22bn worth of liquidity through a triple 7-day reverse repo purchase at an average rate of 14.0%.
See a summary of the offering below;
Reflecting the tightened liquidity, Treasury bills were undersubscribed with the overall subscription coming in at 84.07%, down from 92.11% the previous week.
Investors bid KES 20.18bn, with 79.6% of the bids geared towards the 91-day paper which recorded a 401.67% subscription, down from 450.01% recorded in the previous week.
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The subscription rate for the 182-day and 364-day papers came in at 15.83% and 25.27%, respectively – the market-weighted average rate for the 364-day paper declined to 16.13%, from 17.19%, but remained way higher than the rate of accepted bids.
Bond turnover in the domestic secondary market declined 34.90% during the week ending 21st September, reversing the previous week’s gains.
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Meanwhile, the Central Bank issued a tap sale on the September bonds, seeking to raise KES 15.0bn. The papers have an effective tenor of 1.9 years and 2.9 years, for FXD1/2023/02 and FXD1/2016/10, respectively and the period of sale runs up to 28th September 2023.
The bond coupon rate is 15.0% and 17.0% for FXD1/2016/10 and FXD1/2023/02, and the yields stand at 17.93% and 17.45%, respectively. See below a summary of the offer;
In other news, the Capital Markets Authority (CMA) approved the issuance of Kenya’s first-ever Sukuk Bond – an Islamic bond instrument that complies with Shari’ah principles.
The bond will be issued by Linzi Finco Trust in a bid to raise KES 3.0bn for the construction of 3,069 housing units in line with the government’s affordable housing agenda.
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The bond is set to offer investors an internal rate of return of 11.13% and is expected to be asset-backed as is the nature of Islamic financial instruments.
On interest rates, the weighted average rates for the 91-day, 182-day, and 364-day papers increased by 27.15bp, 52.51bp, and 49.32bp to 14.79%, 14.94%, and 15.22%, respectively – cumulatively, the rates have increased by 541.76bp, 574.39bp, and 585.44bp since the year began. See below the performance of the yields on the government papers;
Also during the week, yields on all Eurobonds increased, with KENINT 2024 expected to mature in June 2024 jumping to an eighteen-week high.
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We suspect the surge was caused by investors’ reaction to Kenya’s President’s comments about having a new financing order for Africa that involves green financing and a moratorium.
The President also criticized the work of credit rating agencies when a plan by the government to buy back its Eurobond was construed as a default by Moody’s.
See below a summary of the performance;
