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Short-term T-bill yields slightly up as liquidity stays tight

The Central Bank of Kenya. file photo | nmg
The Central Bank of Kenya. file photo | nmg 

Interest on short-term government papers rose in low-subscription auctions last week as liquidity remained tight, shrugging off cash injection from bonus payments to Kenya Tea Development Agency (KTDA) farmers earlier in the week.

Traders said the liquidity among banks, which are the largest players at the government Treasury bill (T-bill) auctions, was still tight as they waited for the government to start making payments after the election.

“There is no liquidity because the government has not made payments,” Crispus Otieno, a fixed income dealer at AIB Capital, said.

“The KTDA bonus cash stays with a few banks that’s why it didn’t trickle into the auction.” At the auction, yields on the 91-day T-bill rose to 8.015 per cent from 8.011 per cent the previous week.

Those of 182- and 364-day bills rose to 10.433 per cent and 10.995 per cent respectively.

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Central Bank of Kenya had offered Sh24 billion for the three papers, but received Sh16.7 billion from investors, a 69.5 per cent subscription rate.

This extended the string of undersubscribed auction to eight weeks. Mr Otieno said an extended electioneering period, which saw repeat presidential election rerun take place on October 26, had made it difficult for the government to focus on its fiscal demands and delayed payments to suppliers.

“This has squeezed liquidity among lenders,” he said, adding that he expected subscriptions at the T-bills auction to remain low in coming weeks as the political climate remained uncertain.

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