Demand for Kenya’s 5- and 10-year Treasury bonds jumped at auction yesterday, lifted by commercial banks shifting focus back to the debt market after returns on term auction deposits dwindled in recent weeks.
The central bank said yesterday it received bids worth 17.21 billion shillings ($205 million) for the total 10 billion shillings of five- and 10-year bonds offered and accepted 12.50 billion shillings.
The weighted average yield on Kenya’s 10-year Treasury bond rose to 13.630 percent at an oversubscribed auction from 12.705 percent at its last sale in June, while the yield on a five-year bond rose to 13.548 percent from 11.855 percent at its last sale in May.
The weighted average yield on Kenya’s 182-day Treasury bills also rose at the auction to 13.379 percent from 12.801 percent last week.
The 10-year bond attracted bids worth 10.98 billion shillings and the bank accepted 7.46 billion shillings. It received bids worth 6.23 billion shillings for the five-year bond and accepted 5.04 billion shillings.
Policymakers in June introduced term auction deposits, which are longer than the normal repurchase agreements and offer higher returns of up to 18 percent, to support the currency. But in recent repo offers the central bank has settled for lesser amounts despite the high bids it received, dragging down the weighted average interest rate on the repos to 12.75 percent on Wednesday.
Next week the bank will offer 91-day and 182-day Treasury bills worth a total 8 billion shillings, while it plans to auction bonds worth a total 12 billion shillings in August, whose tenor it will determine later.
AUTHOR: BEN GUMO