Three-month Treasury Bills rate falls to single digit


Treasury Bill rates for three-month government paper fell to a single digit on Thursday as the government continued to pick up local debt at competitive pricing.

Returns on the 91-day Treasury Bill declined to 9.65 per cent from 13.76 per cent last week.

The rates have been on a free fall over the past four weeks after peaking at 22.5 per cent on October 22.

This signals that the government has cooled down on borrowing locally, having chocked up Sh94.4 billion for the current fiscal year compared to a target of about Sh91.3 billion – according to Cyton Investments.

Analysts, however, say the rates may change once the short-term debts the government has been picking up mature.

“Given that the government has resorted to funding the budget through short-term borrowings, which mature within the current fiscal year, we expect the aggressive borrowing to continue, as pressure remains to re-finance its obligations within this fiscal year,” Cyton Investment said in a note to investors last week.

The decline following a monetary policy decision to keep interest rates at 11.5 per cent on Tuesday, will put pressure on banks to re-price their loans.

Although the auctions were oversubscribed for the eighth straight week, the lower rates may drive away foreign inflows targeting to lock their money on high yielding rates that could put pressure on the shilling.

This week, the Central bank of Kenya received 301 bids when it put out a Sh6 billion cash call, 380 per cent subscription compared to 1,065 per cent two weeks ago.