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Kenya borrows 348 mln USD from domestic market on banks high appetite

Xinhua, September 22, 2016 Adjust font size:

Kenya has raised over 348 million U.S. dollars for budgetary support from 248 million dollars Treasury bonds as commercial banks' appetite to lend to the government more than doubles following the capping of interest charges.

The Treasury bonds floated last week, according to auction results from the Central Bank of Kenya released Thursday, received bids worth 558 million dollars, more than double the money sought.

The high bidding on the five-year and 20-year bonds saw the Treasury borrow over 100 million dollars more than what it had sought.

"The Central Bank offered 5-year and 20-year Treasury Bonds for a total amount of 248 million dollars. The total number of bids received was 771 amounting to 382 million dollars, and 734 amounting to 176 million dollars for the 5-year and 20-year bond respectively," said the apex bank.

Yields on the bonds dropped in the auction, meaning the government borrowed the money cheaply from the domestic market.

The weighted average rate for successful bids was 13.1 percent for the 5-year bond and 14.6 percent for the 20-year bond, down from 14 percent and 14.6 percent respectively from previous auction.

Analysts have attributed the high bidding to commercial banks, which have shifted to the securities to make up for interest capping introduced in the East African nation by a new law.

"There is increased activity at the debt market after the capping of lending rates because commercial banks want to make up for low interest charges by investing in Treasury bills and bonds. The government is the biggest winner," said Henry Wandera, an economics lecturer in Nairobi.

Uptake of the Treasury bonds and bills by commercial banks is expected to rise further following the drop of the Central Bank rate from 10.5 percent to 10 percent by the Monetary Policy Committee (MPC) Tuesday as the regulator hinted at stimulating economic growth. Endit