Interest on 182-day T-bill crosses 11 percent mark

Kenya’s diaspora remittances have continued to grow with projections indicating a new record high for 2023. FILE PHOTO | POOL

Interest rate on the 182-day Treasury Bill has crossed the 11 percent mark as returns on the short-term securities continue to go up.

The weighted average interest rate of accepted bids on the paper jumped to 11.113 percent in last week’s sale from 10.978 percent to represent a 0.135 percent increase.

The interest rate on the 364-day T-bill meanwhile rose by 0.067 percent to 11.457 percent mirroring the general rise in returns from government securities.

The shortest-dated 91-day T-bill, on the other hand, posted the highest yield pressure as interest rates on the paper rose by 0.314 percent to 10.832 percent from 10.518 percent.

The jump comes amid continued investor interest in the short-ended securities in a move supported largely by the paper’s short-term to maturity.

Investors have shunned bonds as a shield to potential mark-to-market losses that characterised the current rising interest rates environment.

Last week’s Treasury bills auction for instance registered bids of Sh22 billion to represent a 91.87 percent performance rate with the 91-day paper marking the bulk of bids at Sh14.2 billion.

A total of Sh21 billion was accepted in the auction. Investors’ gravitation to shorter dated securities has prompted the Central Bank of Kenya (CBK) to concentrate on issuing bonds maturing in a few years.

The apex bank, for instance, issued its new three-year bond for a third time this month, raising Sh27.2 billion in the latest auction that closed last week.

Analysts have tied the rising interest rates on Treasury bills to multiple factors including pressure on the National Treasury to meet its domestic financing target next month.

“Over the last one year, average 91, 182 and 364-day T-bill rates have increased showing the lasting impact of CBR revisions, high inflation and increased fiscal deficit financing,” analysts at Sterling Capital said in an earlier fixed-income note.

The effecting of risk-based pricing by banks is due to pile pressure on interest rates with State expected to compete with the private sector for credit.

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