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September 25, 2017

Supreme Court ruling impacts monetary and financial markets

The Central Bank of Kenya./MONICAH MWANGI
The Central Bank of Kenya./MONICAH MWANGI

CBK/ The money market was relatively liquid during the week ending September 6, 2017, supported by net government payments. The weighted average interbank rate decreased to 5.27 per cent from 5.48 per cent in the previous week.

The capital markets recorded mixed performance during the week ending September 7, 2017, with equities turnover gaining on the back of large supply of shares and a decline in share prices and market capitalization.

Monetary Policy Operations

Liquidity in the money market increased during the week ending September 6, 2017, largely supported by government payments. The government payments during the week ending September 6, 2017, amounted to Sh50.9 billion. The liquidity reducing activities during the period included tax payments of Sh15 billion, net government securities issuances of Sh11.7 billion and Repos amounting to Sh20.1 billion. Commercial banks’ excess reserves above 5.25 per cent averaging requirement increased to Sh 11.9 billion during the week ending September 6, 2017, from the previous week’s average of Sh10.32 billion

Exchange rate

The Kenya shilling stabilized against the US dollar, the euro and the Japanese yen but weakened against the pound sterling during the week ending September 7, 2017. The stability of the Kenya shilling against the US dollar partly reflected weakening of the US dollar following rising geopolitical tensions and a return to market normalcy, on the local scene, following the Supreme Court ruling on September 1, 2017. In the EAC region, the Kenya shilling stabilised against the region’s currencies.

Equity Market

The equities market recorded a decline across share price indices and consequently, market capitalization. Total number of shares traded increased by 110.7 per cent, resulting in increased equity turnover by 113.0 per cent. The performance reflects initial transitory market reaction to uncertainty following nullification of the results of the August 8, 2017 presidential elections by the Supreme Court on September 1, 2017.

Bond Market and Eurobond Yields

The volume of bonds traded declined by 40.0 per cent during the week ending September 7, 2017, but the number of bonds traded increased to 202 deals from 112 deals in the previous week. The low activity reflects investors’ focus on a Tap Sale of FXD1/2017/5 dated September 4, 2017, that raised Sh17.5 billion. Kenya’s 5– and 10– year eurobonds trading yields increased by 0.27 percentage points and 0.15 percentage points to close the week at 4.18 per cent and 6.16 percent, respectively. The margnial increase in the yield, signalled a stable outlook on Kenyan bonds in the international markets.

Interbank market

The weighted average interbank rate decreased to 5.27 per cent in the week ending September 6, 2017 from 5.48 per cent recorded in the previous week. The volumes transacted ranged from Sh8.57 billion to Sh13.25 billion during the week, giving an average of Sh10.2 billion compared to an average of Sh17.2 billion the previous week. The number of deals stood at 25 compared to 35 deals transacted the previous week.

SOURCE: CENTRAL BANK OF KENYA

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