Kenya Three-Month Debt Yields Drop for 4th Week as Demand Is Double Offer
Kenya’s three-month borrowing costs fell for the fourth successive weekly auction as investors bid for double the amount of bills the central bank offered.
The yield on 91-day Treasury bills declined to 8.954 percent at today’s sale from 8.98 percent on June 30, the Nairobi-based Central Bank of Kenya said in an e-mailed statement. The bank issued 4.08 billion shillings ($45 million) of debt after investors bid for 4.13 billion shillings of the 2 billion shillings offered.
The Kenyan government has kept borrowing costs from rising at its weekly auctions by limiting its issue of debt to investors willing to accept the lowest yields compared with rivals. The strategy was adopted after three-month bill yields surged to a more than nine-year high as inflation accelerated to the strongest in more than two years and the shilling weakened to a 17-year low.
“The central bank is looking at capping the rate to ensure the short-term securities do not distort the yield curve, which in turn will push up the yields on the long-term securities,” Dipna Shah, an investment analyst at Nairobi-based PineBridge Investments East Africa Ltd., said in an interview today before the auction.
The central bank increased the overnight lending rate to 8 percent from 6.25 percent to rein in price growth and curb speculation in the shilling, it said on June 29.
Kenya will boost spending by 15 percent to 1.15 trillion shillings in the year through June 2012, increasing investments in roads and energy, Finance Minister Uhuru Kenyatta said in his budget speech on June 8. The deficit excluding grants in East Africa’s biggest economy will widen to 8.8 percent of gross domestic product in 2011-12 from 8.4 percent a year earlier. Domestic borrowing is targeted at 119.5 billion shillings in the next financial year, down from 125 billion shillings this year.
Kenya’s monetary policy committee raised the benchmark interest rate by a quarter percentage point to 6.25 percent and the cash reserve ratio by a quarter of a percentage point to 4.75 percent, central bank said on May 31.
To contact the reporter on this story: Johnstone Ole Turana in Nairobi at jturana@bloomberg.net
To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net
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