Liquidity conditions deteriorated in the week as government receipts outweighed settlements. Consequently, the cost of funds in the interbank market slightly rose to an average of 12.4%, an increase of 9.2bp for the week.
Even then, the average traded volumes climbed 25.4% to KES 35.5 bn from KES 28.3 bn a week earlier.
The Central Bank of Kenya began the week with a bid to inject liquidity worth KES 20.0 bn through 7-day reverse repo purchases. The regulator received bids worth KES 40.1 bn and accepted all at the average rate of 13.8%.
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Despite the tightened liquidity posture, Treasury bills were oversubscribed following a series of undersubscriptions in the previous weeks.
Investors bid KES 38.8 bn, translating to a subscription rate of 161.8. 89.7% of the bids were geared towards the 91-day paper which recorded an 870.8% subscription, up from 539.8% recorded in the previous week.
The subscription rate for the 182-day and 364-day papers came in at 12.3% and 27.8%, respectively – the weighted average rate for all the short-term papers crossed 14% with the 364-day paper climbing the most, outpacing the rates for the 182-day and 91-day papers.
In market news, the most recent Purchasing Managers’ Index (PMI) data shows that Kenya’s private sector business conditions improved marginally in August 2023, following a run of contractions in the previous six months. The headline figure rose to 50.6, from 45.5 in July, marking a seven-month high.
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The improvement was a result of an increase in new orders which saw output return to expansion territory amid sustained political stability. Consequently, employment prospects remained positive, with employers hiring for the sixth month in a row to supplement existing teams and ramp up business activity. In addition, most businesses cited improved supplier time as they sought to enhance cash flows.
Business confidence regarding the year ahead picked up to a five-month high in August as firms with a positive outlook cited expansion plans such as opening new branches and broadening their product and service offerings, increasing overall confidence.
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