Foreign cash flow push T-bill rates down in kenya

Average interest rates on the benchmark 91-day Treasury Bills have fallen to single-digits for the first time since early July, helped by increased inflows from foreign investors chasing high returns. At the weekly auction on Thursday last week, yield on the three-month by the government to borrow cash to fund the budget fell to 9.65 per cent – a 4.11 per cent drop from previous week’s 13.76 per cent.
This is a massive 12.85 percentage – point reduction from a peak of 22.5 percent drop from previous week’s 13.76 per cent. This is a massive 12.85 percentage –point reduction from a peak of 22.5 per cent, on October 22, when the government was still facing cash flow challenges.
The last time the rate was in the single-digit territory was on July 2 at 8.2 per cent, before it shot up to 11.3 per cent on July 9.
Interest rate on 182 – and 364 – day T-bills also declined by 4.21 and 3.51 percentage points, respectively, to 12.28 and 13.62 per cent.
The Central Bank of Kenya – government’s fiscal agent in the money markets – had by last week reflected bids valued at Kshs.182.44 billion out of the Kshs.261.28 billion in total offers.
Last week, only Kshs.8.37 billion out of the Kshs.22.85 billion offered through the 91-day paper was accepted by the CBK.
The rate on the 91-day T-bill is usually used by commercial banks as benchmark for pricing loans as it is considered the least risky.
Its increase to over 20 per cent last month saw banks increase its interest as much as 30 per cent for new borrowers.