The interbank rate, whose movement is a good indicator of falling or rising liquidity levels, has climbed from an eight-year low of 1.7 per cent last Friday to 3.08 per cent in Wednesday trades.
The Central Bank of Kenya (CBK) has also been mopping up liquidity from the market in recent days, including Sh14.5 billion on Wednesday but kept out Thursday citing a balanced market.
Liquidity has dried up in the money market after rising in the first two weeks of the month due to government debt maturities and school fee payments.
The interbank rate, whose movement is a good indicator of falling or rising liquidity levels, has climbed from an eight-year low of 1.7 per cent last Friday to 3.08 per cent in Wednesday trades.
The Central Bank of Kenya (CBK) has also been mopping up liquidity from the market in recent days, including Sh14.5 billion on Wednesday but kept out Thursday citing a balanced market.
Analysts say though the rise is still likely to be tempered by the expected maturities for the short-term paper and th CBK is also likely to intervene through reverse repos in support of smaller banks should they struggle to access cash due to the low rates.
“We expect the overnight rates to be kept at a low as there are no imminent shocks in the market and CBK interventions through the reverse repos will filter out any negative effects on the interbank rates,” said Kingdom Securities in a note. The CBK’s liquidity management has also helped the shilling remain stable and the mop-up on Wednesday was seen to help in preventing volatility in the wake of a terror attack in Nairobi.
The shilling was also stable Thursday, exchanging at an average of 101.70 to the dollar at 2.30pm.
Eyes will now turn to the primary securities auctions, which have the potential of sucking up liquidity from the market and pushing the rate further upwards.
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