Kenyan investors submitted KSh80.6 billion in bids for reopened 15-year and 20-year Treasury bonds, exceeding the government’s KSh50 billion target by KSh30.6 billion.
According to the latest weekly bulletin released by the Central Bank of Kenya (CBK) on October 2, the Treasury bond auction conducted on September 30 attracted bids equivalent to 161.1 per cent of the amount advertised.
“During the Treasury bond auction of September 30, the re-opened 15-year and 20-year Treasury bond received bids totalling KSh80.6 billion against an advertised amount of KSh50.0 billion, representing a performance of 161.1 percent,” CBK said.
The auction involved reopened Treasury bonds, as investors continued to invest in both short-term Treasury bills and long-term government securities.
CBK Says Treasury Bills Also Attract Strong Demand
The robust performance in the bond market was mirrored in the Treasury bills segment during the week ending October 1.
CBK said investors submitted KSh47.7 billion against an advertised amount of KSh28 billion, translating to a subscription rate of 170.4 per cent. Yields on the 91-day, 182-day and 364-day Treasury bills edged lower during the sale.
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The 182-day paper drew the most interest, receiving KSh19.15 billion in bids against the KSh10 billion on offer, while the 91-day bill received KSh17.98 billion against KSh8 billion offered. The 364-day security attracted KSh10.59 billion, slightly above the KSh10 billion target.
CBK accepted KSh12.88 billion from the 91-day paper, KSh17.90 billion from the 182-day paper and KSh10.42 billion from the 364-day security.
Average yields declined marginally across all tenors, with the 91-day Treasury bill falling to 8.769 per cent from 8.778 per cent, the 182-day paper easing to 8.886 per cent from 8.895 per cent, and the 364-day bill dipping to 9.040 per cent from 9.043 per cent.
The September 3 Treasury bill auction attracted strong investor demand, with bids totaling KSh56.3 billion against the KSh28 billion offered, making the sale more than twice oversubscribed.
Inflation Rises as Bond Market Activity Increases
The latest government securities activity comes as Kenya’s inflation rate increased in September.
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CBK reported that overall inflation rose to 6.8 per cent in September from 6.6 per cent in August, with the increase largely driven by higher core inflation.
Core inflation increased to 4.0 per cent from 3.4 per cent, mainly because of higher prices of processed food products, particularly milk and wheat products. Non-core inflation, however, moderated to 14.0 per cent from 14.7 per cent.
The Kenya shilling remained largely stable against major international and regional currencies during the week ending October 1. It traded at KSh129.71 against the US dollar on October 1, slightly weaker than KSh129.48 recorded on September 24.
Kenya’s foreign exchange reserves stood at USD14.93 billion as of October 1, equivalent to 6.1 months of import cover. CBK said the position met its statutory requirement to endeavour to maintain at least four months of import cover.
The money market also remained liquid during the week. Commercial banks’ excess reserves averaged KSh22.1 billion above the 3.25 per cent Cash Reserve Ratio requirement, while the Kenya Shilling Overnight Interbank Average (KESONIA) remained stable at 8.75 per cent.
In the bond market, turnover in the domestic secondary market increased by 27.7 per cent during the week ending October 1.
However, yields on Kenya’s Eurobonds increased by an average of 22.28 basis points in the international market. CBK also reported increases in Eurobond yields for Côte d’Ivoire and Angola.
The Nairobi Securities Exchange recorded declines in its main share indices during the same period. The NASI fell by 0.66 per cent, the NSE 25 declined by 0.91 per cent and the NSE 20 fell by 0.95 per cent.
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