Kenya’s 91-Day Bills Yield Drops to Lowest in Almost 15 Years

The weighted average yield of the notes was at 6.513% at last week’s auction, the lowest since September 2006, according to Central Bank of Kenya data. The rate for 182-day bills was 7.046% and 364-day securities at 7.418%.

“High liquidity has been attributed to cautiousness by banks amid the Covid-19 fallout with private sector credit growth as of June 2021 coming in at 7.7%, against CBK’s revised target of 8.5% in June,” said Genghis Capital Head of Research Churchill Ogutu. “From the month of May, we saw that the government was ahead of its borrowing curve and that gave it latitude to reject bids.”

Key Insights

• Going forward, yields will likely rise as the government implements its budget for the fiscal year beginning July 1, and may be compelled to accept a higher level of bids, according to Ogutu.
• Banks expect an increase in business loans this year, driven by rising economic activity in manufacturing, transport and trade, according to a July central bank survey. The forecast is based on easing of Covid-19 restrictions and the vaccination of more people against the virus.
• Still, risks to the recovery include the uncertainty around the pandemic and political activity ahead of the Aug. 2022 general elections, it said.