Interbank Lending Surges As T-Bill Demand Contracts: CBK Seeks KES 50bn Via Reopened Bonds

Interbank lending surged during the week, with the average traded volumes rising by 118.0% to KES 17.24bn, from KES 7.9bn the prior week. This is mirrored by a 121.4% increase in the transaction count, pointing to increased activity in the interbank market.

The Kenya Shilling Overnight Interbank Average (KESONIA) inched upwards by 1.23bps w/w to an average of 9.467%. Notably, players’ liquidity appears to have tightened in the week, with some players resorting to the discount window (KES 500m).

This week, demand for Treasury bills contracted, with overall subscription declining to 62.9% from 95.7% in the previous week. Investors submitted bids worth KES 15.09bn, of which the fiscal agent accepted 99.3%, slightly above the value of maturities, resulting in a net borrowing of KES 5.14bn.

The 364-day paper led the performance, posting a subscription rate of 115.3% (slightly lower than the 131.3% recorded in the week prior) as investors sought to lock in higher yields. Additionally, the 91-day and 182-day papers garnered much lower subscription rates at 40.5% and 19.4%, respectively.

Weighted average rates on accepted bids narrowed to 7.91% (-3.18bps), 7.99% (-2.47bps), and 9.53% (-0.36bps) for the 91-, 182-, and 364-day papers, respectively, as the fiscal agent continues to signal a softer near-term interest rate outlook.

In the primary bond market, the CBK announced that it is seeking KES 50.0bn through two long-term reopened bonds; FXD1/2018/015 and FXD1/2021/020, with effective tenors of 7.7 and 15.9 years, respectively

The bonds have coupon rates of 12.65% and 13.44% for FXD1/2018/015 and FXD1/2021/020, respectively. The sale period for both papers will run until 15th October 2025.

Read Also: T-Bills Record First Undersubscription In Two Weeks As Kenyans Go For Shorter Tenors