Interest rates on Treasury bills have declined to levels last seen in August 2023, all below 14%, amid the Central Bank of Kenya’s resolve to begin the easing cycle in August.
- The accepted average yields of the 3 papers fell below the 14.00% mark coming in at 13.05% on the 182-day paper, 13.89% on the 364-day paper with the 91-day paper falling to lower levels of 12.79%.
- Compared to the last week of July, just days before the first rate cut, the 91-day, 182-day and 364-day papers have seen rates decline 20.1%, 22.5% and 17.9% respectively.
- Demand for treasury bills was high in this week’s auction, recording a whooping 398.1% oversubscription, which was however slightly lower than the record 409.9% posted a week earlier.
“If this momentum holds, rates for the 91-day and 182-day papers could inch closer to single digits, aligning with the government’s target of keeping the yield curve below 10% in the short to medium term,” analysts at Standard Investment Bank commented in a research note.
The high oversubscription in the recent auctions points to investors rushing to lock in higher returns as overall rates continue downwards in anticipation of further interest rate cuts by the CBK.
The CBK, as a fiscal agent of the government, received bids worth KSh 95.5 billion out of the KSh 24 billion on offer. However, CBK accepted KSh 43.03 billion – 45% of the total bids received.
The 91-day paper was oversubscribed by a whooping 759.7% even as dynamics are slowly shifting towards longer dated papers. Investors demanded the longer dated 364-day paper more, which accounted for 34.3% of the total bids received with a 328.2% oversubscription. The 182-day paper attracted a 323.3% performance rate.
The falling rates on treasuries is a relief to the government by reducing borrowing costs, making it easy to finance bond and treasury bill maturities.
The CBK delivered its second consecutive interest rate cut earlier in October, in line with chances of another mild cut in December. The apex bank has slashed rates by a total 100 basis points this year on the back of easing inflation and stable currency to help stimulate economic activity after a series of hikes towards the end of 2023.
