Kenya’s Treasury Bills Defy Foreign Investor Exit as Investor Confidence Holds Firm – NCBA

Kenya’s financial markets are showing a tale of two halves as robust demand for government securities contrasts with notable foreign investor outflows from the Nairobi Securities Exchange (NSE).

Recent data shows foreign investors have withdrawn approximately KSh 4.6 billion from the bourse, but appetite for treasury bills remains strong, with yields holding below the 8% mark. Analysts say this signals continued confidence in Kenya’s short-term government debt despite global economic headwinds.

Speaking in an exclusive interview with CNBC Africa, Raphael Agung’, Group Director of Global Markets and Chief Economist at NCBA Group, noted that treasury auctions — for both bills and bonds — have been consistently oversubscribed. He attributed this to the government’s successful liability management strategies, which have strengthened Kenya’s sovereign liquidity profile.

“Investor confidence is visible through the oversubscription of the treasury instruments, where bid cover ratios exceed 11 times,” Agung’ said, adding that the supportive monetary policy stance has also been key in encouraging private sector lending and investment.

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The upbeat sentiment around government paper comes on the back of a sovereign credit rating upgrade by S&P, which has boosted external perceptions of Kenya as an investment destination. However, challenges remain at home, with reduced tax revenue projections putting pressure on fiscal consolidation plans.

On equities, the KSh 4.67 billion foreign investor outflow at the NSE may suggest caution, but Agbegnran stressed that the movement reflects profit-taking after a market rally, a normal trend in equity trading. Despite the outflows, NSE indices have recorded gains, underscoring underlying positive sentiment.

Liquidity in the domestic market also remains healthy. Interbank rates are averaging around 9.5%, supported by monetary policy adjustments and revisions to cash reserve ratios, which have injected additional funds into the system. “Liquidity is not a concern currently; the monetary environment is stable,” Agbegnran assured.

Looking ahead, Kenya is targeting economic growth of 5.3% this year, with plans to leverage reduced central bank rates to stimulate private sector credit. Priority sectors include agriculture and digital infrastructure, aligned with the country’s Vision 2030 development agenda.

Agung’ advised investors to balance global economic trends with local fundamentals, noting that Kenya’s flexible approach to fiscal and monetary policy is likely to sustain growth momentum. “There’s visible buoyancy across asset categories; however, investors need a focused approach when selecting specific investment targets,” he said.

While the pullback by foreign investors dominates headlines, the resilience of treasury bills and the strengthening macroeconomic environment suggest Kenya’s financial markets remain on a stable footing, offering a platform for future growth and investment opportunities.

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