Interest on treasury bills, bonds grows due to reduced offshore demand

 

By MARTIN LUTHER OKETCH

Interest on government securities has marginally increased across board for the month ending March due to reduced demand, especially from offshore investors, who have opted to invest in safe haven
such as the US.

Under normal circumstance offshore investors hold up to 10 per cent of total government securities.
According to the Ministry of Finance Economic March Performance report, which was published on Monday, treasury bill yields (interest rates) increased marginally for all tenors during the period.
For instance, the report notes, annualised Treasury Bill yields for March stood at 9.58 per cent, 11 per cent and 13.38 per cent from 9.57 per cent, 10.95 per cent and 12.63 per cent in February for the 91, 182 and 364-day tenors, respectively.

“The marginal increase in yields was on account of reduced demand, especially from offshore sources,” the Ministry of Finance report said, noting that during March, there were two Treasury Bill auctions and one Treasure Bond auction in the primary market, in which Shs693.56b was raised.

At least Shs430.42b was raised from Treasury Bills and Shs263.13b from Treasury Bonds.

All the money, the report notes, was used to refinance maturing domestic debt.

Commercial lending rates for shilling-denominated credit, the report noted, eased in February 2020 to an averaged 19.1 per cent compared to 19.9 per cent in January. Foreign currency denominated interest rates remained unchanged.
The reduction, the report noted, reflects improvements in the credit market and easing in monetary conditions since October 2019.