Money Markets
The Central Bank of Kenya headquarters in Nairobi. PHOTO | FILE
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- The latest CBK data shows investors bid a total of Sh36.75 billion against the offered Sh12 billion worth of 182 and 364-day Treasury bills this week, with the CBK accepting only Sh18.23 billion.
- The restraint by the government in taking up funds is helping keep interest rates on the short-term debt in check, against fears in the market that the heavy maturities (and repayments) combined with a yawning budget deficit would push the rates upwards.
- The combination of CBK restraint in the primary markets and the Treasury’s revision of domestic borrowing is likely to be welcomed by economists, who have called for fiscal consolidation in order to rein in interest rates.
The Central Bank of Kenya (CBK) has accepted just 60
per cent of the Treasury bill bids since the beginning of the year
indicating resolve to keep current loan rates stable.
The latest CBK data shows investors bid a total of Sh36.75
billion against the offered Sh12 billion worth of 182 and 364-day
Treasury bills this week, with the CBK accepting only Sh18.23 billion.
The cumulative bids for all three tenors of T-bills
since the turn of the year stand at Sh137.35 billion, with the accepted
amount at Sh81.2 billion.
In the Budget Policy Statement released this week,
the Treasury revised down by Sh53.3 billion its domestic borrowing
target to Sh168 billion, which means that the pressure to borrow has
reduced at a time there are heavy maturities of domestic debt.
Genghis Capital fixed income analyst Vinita Kotedia
said the government is keeping its appetite in check to curb interest
rates, meaning the decision to accept fewer bids looks like a monetary
mechanism and signals calmer market conditions.
“Another factor which has promoted a downturn in
interest rates is a high volume of government securities redemptions
which are scheduled in the first quarter—this has promoted increased
liquidity in the money market, and is effectively beginning to manage
the aggressive investor bidding nature that we have experienced over the
last few weeks,” said Ms Kotedia.
“We have also observed more consolidation between
fiscal and monetary policy as the CBK is aligning its domestic borrowing
with the revised borrowing target of Sh168 billion which, in turn is
promoting lower volatility in interest rates.”
The restraint by the government in taking up funds
is helping keep interest rates on the short-term debt in check, against
fears in the market that the heavy maturities (and repayments) combined
with a yawning budget deficit would push the rates upwards.
Interest rates on all three T-bill tenors that had
climbed to a four-month high in mid-January came down this week, with
the 182-day paper rate falling by 0.46 percentage points to 13.91 per
cent and the 384-day paper rate reducing by 0.5 percentage points to
13.96 per cent.
The auction results for this week’s 91-day paper
had not been released by the time of going to press. The previous
auction on January 28 had however seen a slight retreat in interest
rate, by 0.1 percentage points to 11.8 per cent.
The CBK has signalled the market that it is
concerned by the burden that higher interest rates is placing on
borrowers of bank loans when it maintained both the base rate at 11.5
per cent and the Kenya Banks Reference Rate at 9.87 per cent during last
month’s monetary policy committee meeting.
The combination of CBK restraint in the primary
markets and the Treasury’s revision of domestic borrowing is likely to
be welcomed by economists, who have called for fiscal consolidation in
order to rein in interest rates.
“What we also want to see in this consolidation is
the CBK rejecting high bids and reducing auction sizes, which will help
curb interest rate growth. If they show desperation for funds there will
be rate pressure,” said CfC Stanbic Bank economist Jibran Qureishi last week
No comments :
Post a Comment