Shilling gains on attractive Treasury yield

Kenya's shilling strengthened in early trading on Monday, supported by inflows of foreign exchange into government debt and helped by subdued importer demand for dollars.

The shilling was quoted at 104.90/105.10, compared to Friday's close of 105.25/35. "We have received some inflows," said one trader at a
commercial bank, adding that offshore investors were attracted by rising yields on government paper.

The weighted average yield on 91-day T-bills jumped to 18.607 percent last week from 14.486 percent the week before.

The yield at a one-year T-bond sale last week was 19.441 percent.

Overnight interbank rates have also been rising, climbing to more than 25 percent from around 13 percent earlier this month, due to tight shilling liquidity.

"Importers would rather hold on to shillings and postpone their purchases," said one dealer.