Money Markets
The Treasury building in Nairobi. In the last two auctions of government
debt the Treasury has issued securities worth Sh9 billion. PHOTO |
FILE
By GEORGE NGIGI
In Summary
Slow cash uptake by government ministries has helped
the Treasury reduce its overdraft at Central Bank of Kenya (CBK) and cut
interest rates in the last three weeks. Data from CBK’s weekly bulletin
shows short-term debt to the government dropped by Sh14.3 billion to
Sh24.8 billion while interest rates on the 91-day Treasury bill declined
to 8.7 per cent.
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Sources at the Treasury indicated the Government had not
begun using the sovereign bond cash but its credit appetite has been
tempered by the low demand for funds from ministries.
“The spending cycle is yet to start but revenue
collection is ongoing,” said a source at the Treasury who is not
authorised to speak to the press. In the last two auctions of government
debt, the Treasury has issued securities worth Sh9 billion compared to
Sh12 billion it had sought to raise at the previous weekly auctions,
underlining the low cash demand.
Despite the delayed use of the Eurobond money,
interest rates have started heading south due to high liquidity in the
market with CBK increasing its foreign exchange reserves.
The yield on the 91-day Treasury bills has seen the
largest decline climbing down from 11.43 per cent in the first week of
the month to stand at 8.7 per cent last week, while the half-year paper
is now trading at 10 per cent down from 11.8 per cent. The drop in
interest rates has seen the short-term bill lose its allure in a move
that releases cash for lending to the private sector.
Bids received for the Sh3 billion 91-day paper were just Sh753 million compared to previous oversubscription.
Attractive options
The drop has encouraged companies to start going
for corporate bonds as investors look for attractive options to pack
their money. Insurers Britam and UAP have just concluded successful bonds to raise Sh6 billion and Sh2 billion respectfully.
South Africa-based Real People has announced plans
to issue a bond joining the likes of NIC Bank and CIC Insurance which
are also eyeing the debt market. CBK data shows that its foreign
reserves shot up by Sh30 billion ($350 million) in the first week of
July.
CBK noted that the reserves did not include
proceeds from the Euro bond which will go into the account when the
government starts spending the money and needs to convert the dollars to
local currency. Though there was no data on how much the Treasury has
collected in revenues, it had collected Sh54.7 billion in revenues in
July last year and had issued out Sh48 billion for expenditures.
gngigi@ke.nationmedia.com
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