Average Lending Rate Slipped To 11.5% Offering Breathing Room For Borrowers

Last week, the average lending rate slipped to 11.5% from 11.8%, offering some breathing room for borrowers in the interbank market.

Meanwhile, interbank volumes soared, more than doubling to KES 54.36bn from KES 27.16bn, as transaction count spiked 34.6%. Interestingly, after a month of dormancy, the discount window reopened, recording KES 0.79bn in trades, signaling desperate liquidity maneuvers by some players.

Treasury bill demand hit a snag this week, dropping to a 69.2% subscription rate—the lowest since July 2024, when the rally first gained traction. The dip likely reflects investors shifting focus to the concurrent bond issuance, aiming to lock in higher returns.

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Interest was strongest on the 364-day paper, which continues to offer the most attractive yield despite the longer tenure. Total bids tallied KES 16.60bn, with the fiscal agent accepting nearly all of it. Notably, for the first time in three months, short-term maturities outpaced bids received, leading to a net repayment of KES 8.28bn.

In the primary bond market, December’s final issuance wrapped up on a high note, raising KES 43.45bn against bids totaling KES 53.63bn—an impressive 268.1% subscription rate. Investors clearly remain eager to lock in higher yields while they last.

The weighted average rate of accepted bids came in at 14.69%, topping the prevailing rate and reinforcing the strong appetite for attractive returns.

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