Interbank Rate Marginally Dips As Yield on 5-Year Eurobond Moves 0.1%

The average interbank rate declined marginally to 3.6 percent from 3.7 percent the previous week according to Cytonn Report.

The average volumes traded in the interbank market rose by 36.7 percent to 21.1 billion shillings from 15.4 billion shillings the previous week, reflecting banks’ mobilization of funds for tax remittances.

The lower interbank rate points to improved liquidity conditions, attributed to large banks trading at lower interest rates.

Kenya Eurobonds

According to Bloomberg, the yield on the 5-year Eurobond issued in 2014 increased by 0.1 percentage points to 4.4 percent from 4.3 percent the previous week, while the yield on the 10-year Eurobond issued in 2014 was constant from the previous week at 7.2 percent.

Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 2.5 percentage points and 4.4 percentage points for the 10-year and 5-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country.

For the February 2018 Eurobond issue, during the week, the yields on both the 10-year Eurobond declined by 0.1 percentage points to 7.9 percent from 8.0 percent the previous week, while the yield on the 30-year Eurobond remained constant at 8.9 percent. Since the issue date, the yields on the 10-year and 30-year Eurobonds have both increased by 0.6 percentage points.

The Kenyan Shilling

During the week, the Kenya Shilling depreciated by 0.2 percent against the US Dollar to close at 101.2 shillings from 101.0 shillings to the dollar recorded the previous week, attributed to end-month dollar demand from oil and merchant importers.

The Kenya Shilling has appreciated by 1.9 percent year to date basis, and Cytonn still maintains that the shilling should remain relatively stable to the dollar in the short term, supported by the narrowing of the current account deficit to 5.8 percent in the 12-months to June 2018, from 6.3 percent in March 2018.

The shilling continues to enjoy stronger inflows from principal exports, which include coffee, tea, and horticulture, which increased by 1.7 percent during the month of July to 24.7 billion shillings from 24.3 billion in June, with the exports from horticulture improving by 9.1 percent.