The Central bank of Kenya, Nairobi on Sunday, November 22, 2020. PHOTO | DENNIS ONSONGO | NMG
Tightening liquidity in the money market has pushed the rate at which banks borrow from each other to a two-and-a-half-month high and helped ease pressure on the shilling.
The interbank rate stood at 5.97 percent on Tuesday, a level last seen on October 8, attributed by analysts at NCBA to banks looking to preserve cash buffers to cater for the spending rush around the festive period and new school term in January.
With shilling liquidity tightening, the currency has gained some resistance against the dollar, easing up slightly on the persistent depreciation that began in the first week of September.
Yesterday, the shilling was exchanging at an average of 113.12 units to the dollar, having held at 113.10 on Monday and Tuesday.
“This (tight liquidity) is in light of an end-year preservation of bank buffers to cater for increased customer transactions during the December festive season, quarter end tax settlements as well as for the bank balance sheet enhancement exercise for end-year reporting,” said NCBA economists in a weekly fixed income note.
“The Central Bank as well maintained its support of cash strapped players injecting a reported Sh67 billion. While liquidity strains could persist this week, end month government outlays coupled with central bank support should help soften the blow.”
Should the tight liquidity persist into next week, it could hurt the Treasury’s efforts to raise Sh30 billion in the first auction of its January 2022 bond issuance, which closes on Tuesday.
The second auction of the offer, which is also seeking Sh30 billion, will close on January 18.
Already, Treasury bills sales have reflected the tight liquidity through significant under subscription, even accounting for the traditional low activity in the festive season.
Last week’s sale which sought Sh24 billion received bids worth Sh6.38 billion, out of which the CBK took up Sh6.37 billion.
No comments :
Post a Comment