Skip to content
Market News

Liquidity Conditions In The Money Market: A Stable Start To The Year

BY Soko Directory Team · January 13, 2025 12:01 pm

The Kenyan money market began the year on a steady footing, marked by stable liquidity conditions. The average lending rate remained relatively unchanged at 11.1%, reflecting a consistent monetary environment conducive to predictable borrowing costs for market participants.

This stability came alongside a remarkable increase in interbank volumes, which surged by 52.3%, reaching KES 34.58 billion compared to KES 22.72 billion previously. The number of transactions also recorded a notable growth, climbing by 15.0%, signaling heightened activity in the interbank market.

Central Bank of Kenya’s Active Role in Open Market Operations

In the open market, the Central Bank of Kenya (CBK) played a pivotal role in managing liquidity through its mop-up operations. Over the review period, the CBK absorbed more than KES 60 billion from the interbank market. This demonstrated the regulator’s proactive approach to maintaining monetary stability, particularly in light of the increased interbank activity. Interestingly, the offers in these operations were oversubscribed, underscoring the market’s robust liquidity and the institutions’ willingness to align with CBK’s monetary policy signals. The trades during this period were conducted at an average rate of 11.2%, closely aligned with the benchmark rate, further emphasizing the stability in the market’s lending dynamics.

Treasury Bills: A Resurgence in Demand

This week, demand for Treasury bills experienced a significant rebound following a month of relatively subdued interest, likely attributed to the festive season’s impact on investor behavior. The overall subscription rate for T-bills soared to an impressive 138.1%, compared to 65.4% in the prior week. This resurgence was driven primarily by the 91-day paper, which emerged as the focal point of investor interest, contributing 40.2% of the total bids. The uptick in demand reflects renewed confidence in short-term government securities, likely due to their attractive risk-reward balance and liquidity.

In total, bids worth KES 33.14 billion were submitted during the auction, with the fiscal agent accepting 73.8% of the submissions. This translates to KES 24.45 billion in accepted bids, demonstrating the government’s measured approach to balancing its borrowing needs with market conditions.

Read Also: The Unrivaled Power Of Money Market Funds: Why They Are The Best Investment You Can Make This Year

Outlook

The stable start to the year in the money market, marked by steady lending rates, increased interbank activity, and renewed demand for Treasury bills, sets a positive tone for the broader financial sector. The CBK’s strategic interventions and the market’s strong response to short-term securities suggest a balanced and resilient monetary framework moving forward. Market participants will likely continue to monitor liquidity trends, policy signals, and upcoming auctions to inform their strategies in what promises to be an eventful year.

Read Also: ZIIDI: The NEW Money Market Fund In Town – How Safe And Competitive Is It?

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

Trending Stories
Related Articles
Explore Soko Directory
Soko Directory Archives