Latest data shows the 91-day Treasury bill is now offering a yield of 7.73 per cent, the lowest since October 2016.
The rate on the 182-day paper stands at 9.6 per cent, having last touched this low in July 2016.
Rates on short-term government securities have fallen to the lowest level in nearly two years as demand continues to outweigh the government’s appetite for money, signalling lower earnings for banks, pension funds and unit trust holders.
Latest Central Bank data shows the 91-day Treasury bill is now offering a yield of 7.73 per cent, the lowest since October 2016. The rate on the 182-day paper stands at 9.6 per cent, having last touched this low in July 2016.
The interest rate of 10.49 per cent on the one-year paper is the lowest since October 2016, having averaged just over 11 per cent in the first five months of this year.
“The drop on the shorter end reflects enhanced demand for the papers amid heavy liquidity and increased uncertainty in the direction of interest rates, pending the proposal by the government to repeal interest rate controls,” said Commercial Bank of Africa analysts in a fixed income note.
“Demand for the papers has been buttressed by the slowdown in government borrowing which has seen supply for papers thin out, causing a dash for any available issues.”
Last week’s auctions of the three papers continued the trend of oversubscriptions from investors, who offered a total of Sh30.2 billion against the Treasury target of Sh24 billion. CBK picked up Sh26.8 billion.
Most of the investor attention was on the one-year paper, which accounted for 66 per cent of total bids.
The government normally tapers domestic borrowing towards the end of the fiscal year, mostly when it has already met its borrowing target. The first weeks of the new fiscal year are also characterised by limited borrowing as some government departments would not yet have embarked on their spending programmes for the year.
However, given the fact that rates are presently low and could yet rise in coming months should the rate cap repeal go through, Treasury may opt to front load its domestic borrowing in order to corner cheaper money.
CBK will, however, be keeping an eye on any inflationary pressures arising out of the lower rates, although the headline number is expected to remain within the preferred range this month.
