Markets & Finance

Infrastructure bond inflows prop shilling

shilling

The shilling breached the 89 resistance level in early trading Friday at 88.90/89.00, but weakened slightly to 89.10 at close of trading. PHOTO | FILE

The shilling is expected to carry the momentum built in the last three trading sessions into this week, as it continues to enjoy support from the infrastructure bond and liquidity mop-up.

Last Friday it held steady after two days of gains as dollar inflows from offshore investors looking to buy an infrastructure bond offered support.

“Big institutional investors, especially banks, will likely come in on the last day of the infrastructure bond offer (October 21). This should sustain the momentum into next week,” said Commercial Bank of Africa senior dealer Joshua Anene.

The shilling breached the 89 resistance level in early trading Friday at 88.90/89.00, but weakened slightly to 89.10 at close of trading as investors held back ahead of the long weekend.

The Central Bank of Kenya is scheduled to close the sale of a 12-year bond on Wednesday to raise Sh15 billion to fund construction of roads and other infrastructure projects.

Offshore investors, who are attracted to the bond because it is exempted from withholding tax, were converting dollars into shillings ahead of the sale, Nahashon Mungai, a trader at KCB told Reuters.

The Central Bank continued its liquidity mop up as companies remitted their taxes, adding to the shilling supply. The overnight lending rate for commercial banks remains low, indicating a liquid market.