Interbank Transactions Hit Ksh 40 Billion In January

By Standard Investment Bank / Published February 19, 2024 | 2:54 pm

During the week, the number of interbank transactions increased to 46, from 40, with the average volumes traded climbing by 62.9%, to KES 40.53bn, from KES 24.88bn, the previous week.

Consequently, the interbank rates rose to an average of 13.43%, from the previous 13.27%, equivalent to a 16.2bps increase.

In addition, the Central Bank’s discount window resumed activity following three weeks of inactivity save for the last day of January, disbursing a total of KES 25.3bn in short-term loans, to liquidity-strapped entities.

Reflective of the tightened liquidity, subscription for Treasury bills declined to 177.8%, from 213.0%, in the previous week with the Central Bank receiving bids totaling KES 42.67bn against a KES 24.0bn target. The fiscal agent accepted KES 39.65bn translating to an acceptance rate of 92.9%.

In the primary bond market, the new infrastructure bond issuance, IFB1/2024/8.5, elicited significant interest as per our expectations with the Central Bank receiving bids worth KES 288.66bn against the offered amount of KES 70.0bn, translating to more than four-fold subscription rate of 412.4%.

The February issuance has demonstrated exceptional performance, representing the highest achievement of any domestic issuance in one tranche. This accomplishment reflects the heightened demand for infrastructure bonds, attributed to their tax-exempt status, particularly within a context of elevated interest rates prevailing in the market.

Notably, the government successfully garnered KES 240.96bn from the auction, surpassing the previous record of KES 213.40bn raised at the conclusion of the fiscal year 2022/2023.

The yields on Kenyan Eurobonds were on a downward trajectory during the week with a large portion of the KENINT 2024 buyback all but complete.

Fitch Ratings has maintained Kenya’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at B, with a negative outlook. This decision aligns with the recent affirmation by S&P Global Ratings and underscores shared apprehensions regarding the sovereign’s significant funding requirements, persistent risks to external financial stability, elevated domestic borrowing costs, expensive external commercial borrowing, and impediments to fiscal consolidation, notwithstanding the government’s heightened commitment to narrowing the budget deficit.

In the foreign exchange market, the Kenyan shilling exhibited a notable rally against a majority of pertinent currencies, marking a significant increase in the overall supply of dollars. Notably, the currency achieved its highest gain against the UGX at 10.8% and its lowest against the TZS at 8.1%.