Kenya Treasury-Bill Yield Drops to at Least Four-Year Low After Rate Cut

Demand for Kenya’s 91-day Treasury bills exceeded supply at a sale today, reducing the yield to the lowest in at least four years as a surprise cut in the nation’s benchmark interest rate boosted the securities’ appeal.

The Central Bank of Kenya sold 5 billion shillings ($62 million) of the bills in the capital, Nairobi, today. The bank received 5.1 billion shillings of bids, it said in a statement on its website today. The yield on the bond declined to 1.699 percent compared with 1.728 percent at the previous auction on July 15. That’s the lowest since March 2006, when Bloomberg began regular record-keeping of the data.

“It is a signal that the system is awash with liquidity,” Aly-Khan Satchu, a Nairobi-based independent financial analyst, said in an interview today. “Everyone was expecting 1.92 percent or 1.93 percent and heading back to 2 percent. It shows that the 75 basis-point cut by the central bank has reversed that.”

The East African nation’s central bank unexpectedly cut its benchmark interest rate to 6 percent yesterday, the sixth reduction since 2009, to help spur economic growth and boost the expansion. The rate is now at its lowest level since it was introduced on June 2, 2006.

Annual inflation in Kenya slowed to 3.2 percent in June, compared with 5.3 percent in December, according to data on the website of the Nairobi-based National Bureau of Statistics. The government’s inflation target is 5 percent.

To contact the reporters on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net; Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

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