The second largest injection into the market came from government payments amounting to Sh22.2 billion as ministries and other agencies spent more towards the close of the fiscal year.
Cytonn Investments said that the high subscription — including double the amount offered for a 10-year bond — was also indicative of the migration of cash to government paper following the fall of Chase Bank.
The Central Bank of Kenya (CBK) has pumped billions in the financial markets that together with flight of bank deposits led to high subscription for government securities and continued fall in Treasury bill rates.
CBK net liquidity injection by last week stood at Sh26.4 billion — comprising a total injection of Sh81.1 billion and reduction of Sh54.7 billion.
The single largest injection came from reverse repurchasing agreements of Sh29.8 billion, in which the CBK was paid an interest of 12.66 per cent on average in the course of the week ending April 13.
“The money market was liquid during the week ending April 13, 2016, supported by OMO (open market operations) maturities and reverse repo purchases. The CBK reinforced liquidity distribution in the interbank money market through the reverse repos after a local bank was placed under receivership,” said the CBK in its latest report on financial markets.
As a result of the improved cash availability in the market, the Treasury bill rate fell to 8.9 per cent for the 91-day period with subscription at four times from 11.7 per cent three weeks ago. For the 182-day paper the rate fell to 10.9 per cent with subscription at nearly double from 11.9 per cent three weeks ago.
High subscription
Cytonn Investments said that the high subscription — including double the amount offered for a 10-year bond — was also indicative of the migration of cash to government paper following the fall of Chase Bank.
“The heightened subscription for the government securities is as a result of investors’ flight to safety by holding risk-free government securities after the placement of Chase Bank into receivership by the CBK,” said Cytonn.
The second largest injection into the market came from government payments amounting to Sh22.2 billion as ministries and other agencies spent more towards the close of the fiscal year.
State spending tends to spike as the fiscal year comes to a close as those with authority to incur expenditure attempt to exhaust their allocations.
The increased liquidity was also brought about by the maturity and redemption of some government securities mainly treasury bills and repos, putting Sh15.6 billion in cash into the financial system.
However, the CBK did not report there being a take-up of the cash it recently offered commercial banks that may fall into liquidity problems “through no fault of their own” following the fall of mid-tier Chase Bank.
Last week, CBK governor Patrick Njoroge declined to disclose whether any bank had received cash from the newly established facility. Instead Dr Njoroge said any figures would be known with time.
“We don’t want to talk figures now. Not at this stage; but we had a lot of interest in the new framework from banks even some big ones,” he said.
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