Interest rate capping pushes Kenya's T-bills yields to new low

Source: Xinhua| 2018-11-05 21:56:20|Editor: xuxin
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NAIROBI, Nov. 5 (Xinhua) -- A low interest rate environment in Kenya following the introduction of a ceiling on bank charges has helped to keep yields on government securities down, analysts have noted.

The yields on Kenya's Treasury bills have declined significantly, with that of the benchmark 91-day bill hitting five-year low.

"The 91-day T-bill is currently trading at a yield of 7.4 percent, which is below its five-year average of 9 percent. The declined yield is attributable to the low interest rate environment that has been experienced since the passing of the law capping interest rates," Cytonn, a Nairobi-based investment firm, said in a brief on Monday.

Similarly, the yield on the 364-day paper has hit an all-time low of 9.5 percent from 14 percent months back while the interest rate on the 182-day paper stands at 8.4 percent, from 12 percent.

Cytonn observed that it expected the yields to continue to fall due to two reasons. First, the Central Bank's Monetary Policy Committee has maintained its benchmark lending rate at 9 percent and is likely to remain at the level when the team meets this month.

"The Central Bank has also moved to instill discipline in the market and stabilize interest rates by rejecting aggressive bids that are priced above market for both T-bills and T-bonds," said Cytonn, noting the low yields have affected uptake of the securities, with most offers recording under-subscription.