Capital Markets

Securities rates tipped to fall on high liquidity

cbk

Central Bank of Kenya. FILE PHOTO | NMG

charlesmwaniki_img

Summary

  • Yields on government securities are expected to fall further in the current quarter as investors compete for returns amid high liquidity, analysts say.
  • KCB Capital analyst Mercyline Gatebi said in a fixed income report that the uncertainty in the market has raised appetite for short-term securities, which has seen the rates fall by an average of 70 basis points since the beginning of the year.

Yields on government securities are expected to fall further in the current quarter as investors compete for returns amid high liquidity, analysts say.

KCB Capital analyst Mercyline Gatebi said in a fixed income report that the uncertainty in the market has raised appetite for short-term securities, which has seen the rates fall by an average of 70 basis points since the beginning of the year.

“Appetite for short-term papers is expected to remain prevalent in the market on account of high liquidity and increased investments from financial institutions as they shy away from aggressive lending.

We thus expect a further cut of around 30-50 basis points on the short-term end of the yield curve in the course of the third quarter,” said Ms Gatebi.

Analysts at NCBA say that due to the unfavourable shift in the investment landscape owing to the Covid-19 pandemic, investors are aggressively in search of assets that provide a reasonable risk-return balance.

“The (high) liquidity levels and the persistent hunger for returns will sustain demand for the papers, exerting more pressure on yields, for now,” said NCBA in their latest weekly fixed income report.