GOVERNMENT SECURITIES

Investors shun Treasury bills in post rate cap regime

The paper bills were under-subscribed, receiving bids totaling Sh8.4 billion against an advertised amount of Sh24.0 billion, representing a performance of 34.81 per cent

In Summary

•Banks still remain the highest government debt holders at 54.39 per cent, pension fund at 27.88 per cent,  while insurance companies and parastatals at 6.43 per cent and 6.43 per cent respectively.

•The CBK has also been upbeat on its monetary policies having lowered the Central Bank Rate to 8.5 per cent from nine per cent to boost lending to customers.

Central bank of Kenya./FILE
Central bank of Kenya./FILE

Uptake of Treasury bills by local investors slumped in the week ending November 28 under the third week of interest rate cap repeal.

Central Bank's data showed the paper bills were under-subscribed as the 91-day, 182- and one-year bills received bids totaling Sh8.4 billion against an advertised amount of Sh24.0 billion, representing a performance of 34.81 per cent.

Theundersubscription by investor mostly banks follows the repeal of the interest rate cap that became effective on November 7, after President Uhuru Kenyatta assented into law the Finance Bill 2019.

 

The president had failed to sign the bill prior, with a directive to the Parliament calling for the scrap.

The repealing is set to see increased credit to the private and MSME sector after three years of commercial banks terming them risky borrowers.

The three-year regime of cap led to high lending to the government and regard on domestic debt stock, especially by the lenders.

During the week ending November 7 and before kick-off of the cap repeal, Treasury received bids totalling Sh31.8 billion against an advertised amount of Sh24 billion, representing a performance of 132.6 per cent.

This was followed by received bids totaling Sh13.8 billion (57.7 per cent) and 13.5 billion (56.2 per cent) during the week ending November 14 and 21 respectively.

This may indicate banks are now rallying on the repeal gearing to lend more to customers, this also pushed by the inconsistently yields on the short-term securities.

“The Kenya Shilling weakened marginally against major international and regional currencies during the week ending November 28 following increased corporate demand for foreign currency. It exchanged at Sh102.54 per the US dollar on November 28, compared to Sh101.48 on November 21,” the weekly bulleting stated.

 

Banks still remain the highest government debt holders at 54.39 per cent, pension funds at 27.88 per cent,  while insurance companies and parastatals at 6.43 per cent and 6.43 per cent respectively.

The CBK has also been upbeat on its monetary policies having lowered the Central Bank Rate to 8.5 per cent from 9 per cent.

The lowering of the benchmark rate to commercial banks is expected to induce them to also cut their lending rates to increase credit to the private sector and boost the economy.

The tap sale of the 10-year Treasury bond of November 27 received bids totalling Sh8.1 billion against an advertised amount of Sh21.7 billion, recording a performance of 37.5 per cent.

Global stocks have also slipped amid increased concerns on prospects for an amicable interim trade deal between US and China, following President Trump’s signing of Hong Kong Human Rights and Democracy bill.

Campaigns for the UK elections scheduled for December 12 continued to generate uncertainties on the likely nature of Brexit deal, CBK added.