Investors troop back to Kenya’s debt market as yields rise

Investors are trooping back to Kenya’s debt market as interest rates on government securities climb up steadily.

Investors are trooping back to Kenya’s debt market as interest rates on government securities climb up steadily.

Yields on all government short-term papers in the East African nation have been on an upward trend for the past six weeks, surging from 7.51 percent in September to an average of 10 percent. The increase has offered investors lucrative investment opportunities as they seek to cash in on high interest rates. Yields for indicative 91-day Treasury bill in the auction dated November 12, jumped up by 0.11 per cent.

The rates increased to 10.34 percent up from 10.23 percent in the previous week’s auction. “The market weighted average rate was 10.66 percent and the weighted average of accepted bids, which will be applied for non- competitive bids was 10.34 per cent up from 10.23 percent in the previous auction,” said CBK director of financial markets department Gerald Nyaoma in a brief on the auction.
The yields crossed the 10 percent mark in the auction dated Nov. 5, surging from 9.94 percent to 10.23 percent. Similarly, interest rates for the 182-day and 364-day Treasury bills have risen significantly. The rates in this week’s auction rose from 10.85 percent to 10. 92 per cent  for the 182-day bill and from 10.57 percent to 11.94 percent for the 362-day counterpart. Unlike the 91-day Treasury bill, interest rate for the 182-day paper did not fall below 8 percent in September.

The yields stuck at 8.99 percent and jumped to 9.26 percent in the auction dated September 24. Since then, the rates have maintained a firm positive growth.And as interest rates rise, investors have shown massive appetite for the government securities, with most offers by the CBK being oversubscribed. Some of the offers have received double the amount CBK sought in auctions as investors seek higher returns.The best performing bill is the 91-day, whose offers have received up to over 400 percent subscription as investors’ appetite grows because of surging interest rates.
In this week’s auction, CBK offered the 91-day bills worth 35 million dollars. This was a drop from previous week’s 47 million dollars. The bank received bids worth over 156 million dollars in the auction dated Nov. 12.”The CBK offered 91-day Treasury bills worth 35 million dollars. The total number of bids received was 273 amounting 156.9 million dollars, representing a subscription of 447 percent. Total bids accepted amounted to 37 million d
ollars,” said Nyaoma. In the auction dated November 5, CBK offered 91-day Treasury bills worth 47 million dollars. The bank received bids worth over 98 million dollars representing a subscription of more than 200 percent. “The total number of bids received was 226 amounting to 98.8 million dollars, representing a subscription of 209 percent. Total bids accepted was 51.7 million dollars,” said the bank in a brief.

 

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