Expectations of rate cut rise ahead of MPC meeting
The CBK's policy setting organ, the Monetary Policy Committee, is set to meet on September 5, 2012. Photo/FILE
What you need to know:
According to results from the banking sector regulator on this week’s short term paper auctions, the yield on the three, six and twelve month Treasury bills fell, easing the cost of borrowing for the government and lowering returns for investors.
The policy setting organ of the banking sector is set to meet on Wednesday next week at a time when interest rates have been trending downwards, in tandem with the fall in the inflation rate and in response to a stabilised currency.
Interest rates continued on their descent in the latest Treasury bill auctions ahead of next week’s monetary policy committee meeting that is expected to review the lending rates over the next two months.
According to results from the banking sector regulator on this week’s short term paper auctions, the yield on the three, six and twelve month Treasury bills fell, easing the cost of borrowing for the government and lowering returns for investors.
The policy setting organ of the banking sector is set to meet on Wednesday next week at a time when interest rates have been trending downwards, in tandem with the fall in the inflation rate and in response to a stabilised currency.
“We anticipate interest rates to soften informed by improved liquidity conditions, lower inflation expectations and possibility of further monetary easing,” said analysts at Stanbic Investments in their latest monthly update.
The yield on 91-day Treasury bills fell to 8.119 per cent in Thursday’s auction from 8.583 in the previous week.
During Wednesday’s auction, the yield on 182-day Treasury bills fell into single digits to 9.848 per cent from 10.336 per cent the previous week while that of the 364-day Treasury bills fell to 10.032 per cent from 12.853 per cent.
Thursday’s auction saw keen interest from investors on the three-month old paper as the Sh4 billion auction attracted 171 bids worth Sh10.05 billion but the banking regulator accepted 157 bids worth Sh4.79 billion.
Wednesday’s auction saw more investors go for the 182-day Treasury bills which managed to attract 92 bids worth Sh4.42 billion against the targeted Sh4 billion and the Central Bank accepted 91 bids worth Sh3.779 billion.
They however, showed less interest in 364 day Treasury bills which attracted 44 bids worth Sh4.538 billion against a targeted Sh7 billion, all of which were accepted by the banking regulator.
Economic growth
The monetary policy committee will be meeting two months after to review the Central Bank Rate which is its benchmark rate down to 16.5 per cent from 18 per cent, a move that has nudged commercial banks to lower their base lending rates.
The lower cost of loans to consumers and businesses are expected to spur borrowing, which is expected to strengthen economic growth. The Kenya National Bureau of Statistics is expected to release inflation numbers this week.
