Interest rates

Interest rates on Treasury bills continue to climb

Capital markets

Interest rates on Treasury bills continue to climb


The Central Bank of Kenya building in Nairobi. PICTURES | DENNIS ONSONGO | NMG

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Summary

  • The 91-day treasury bill came with an average interest rate of 7.265% in the last auction, compared to 7.254% in the previous auction.
  • The interest rate of the 182-day paper rose from 8.062% to 8.063% while that of the 364-day security jumped to 9.774% against 9.764%.
  • The Central Bank of Kenya, the government’s fiscal agent, had sought to raise a total of 24 billion shillings through the auction, but ended up taking 26.5 billion shillings.

Interest rates on short-term government debt securities continued to rise at the latest auction, signaling higher yields for investors in fixed-income instruments.

The 91-day treasury bill came with an average interest rate of 7.265% in the last auction, compared to 7.254% in the previous auction.

The interest rate of the 182-day paper rose from 8.062% to 8.063% while that of the 364-day security jumped to 9.774% against 9.764%.

The Central Bank of Kenya, the government’s fiscal agent, had sought to raise a total of 24 billion shillings through the auction, but ended up taking 26.5 billion shillings.

Investors had bids of 29.3 billion shillings, indicating increased attractiveness as yields on the securities are at two-year highs.

Rates rose due to a higher rate of acceptance of offers by the CBK as it plans to roll over heavy short-term maturities in the first quarter of the year.

The Treasury faces large maturities on short-term paper in February and March at 107 billion shillings and 100 billion shillings respectively, hence the increased appetite for funds which in turn pushed rates to the bottom. rise. January also saw heavy maturities at 120 billion shillings.

The state has, however, limited borrowing through the issuance of treasury bills to cover only maturities and liquidity management needs, rather than using them to meet part of the financing component of the budget from the domestic market. .

This was done in order to lengthen the maturity profile of domestic debt and reduce short-term refinancing pressure, leading to higher rates as investors take advantage of the government’s desperation for funds to roll over bonds. maturing bonds.

As a result, the share of domestic debt held in the form of these short-term securities has halved since June 2019, from 34% to 17.13%.

Bonds account for 80.5%, with their maturity profile also increasing to nine years, from 7.5 years in June 2019, due to sustained issuance of longer-dated paper.

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