Central Bank governor Patrick Njoroge. PHOTO | FILE
By GEOFFREY IRUNGU
In Summary
- In the latest auction on Wednesday, the 182-day Treasury bill (T-bill) was sold at 21.028 per cent, down 1.283 percentage points compared to last week.
- The decline in rates comes barely a week after the Governor of the Central Bank of Kenya Patrick Njoroge said the monetary authority would gradually bring interest rates down.
Interest rates on government paper went down for the
first time in weeks, signalling increased liquidity in the money markets
and a glimmer of hope for suffering private borrowers.
In the latest auction on Wednesday, the 182-day
Treasury bill (T-bill) was sold at 21.028 per cent, down 1.283
percentage points compared to last week.
For the 364-day paper, the rate was 21.212 per
cent, which was 1.151 percentage points down compared to the previous
auction. The government was looking for Sh8 billion, but ended up
getting nearly eight times that amount - Sh60 billion - in subscription.
The decline in rates comes barely a week after the
Governor of the Central Bank of Kenya Patrick Njoroge said the monetary
authority would gradually bring interest rates down.
“We want to give the economy a soft landing. We
will engineer all the interest rates down gradually. We don’t want a
situation where you have been accelerating the car and then apply brakes
suddenly. You want to bring the rates down over some time,” said Mr
Njoroge.
He added that the CBK would not want to bring the
rates down too quickly as that would destabilise the money markets that
have seen rising rates for months.
The fall in T-bill rates also came amid increased
liquidity in the market which has seen interbank rates fall from a high
of 26 per cent a few weeks ago to the current 14 per cent.
National Treasury secretary Henry Rotich said the
long-awaited mobile phone-based Sh5 billion bond, with Sh3,000 as the
lowest denomination in subscription, had been postponed to await a fall
in interest rates.
“We are waiting to see how rates in the market behave before we set an appropriate date,” said Mr Rotich.
The CBK reported that the money market was liquid
after the monetary authority injected a net of Sh72 billion in the
course of last week, even though this was mainly to the advantage of a
few banks.
The injection of liquidity came in the form of repo
maturities, reverse repo purchases, redemptions of T-bills and bonds
and government payments.
“The money market was relatively liquid during the
week ending October 21. However, the liquidity was skewed in favour of a
few banks,” said the CBK.
As a result of the increased liquidity, even
commercial banks exceeded the minimum requirements for cash deposits
kept in their clearing accounts at the CBK
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