This archive report was first published on 16 September 2019.
Published on September 16, 2019, the Central Bank of Kenya (CBK) is expected to close out its sale of Ksh.50 billion worth of treasury bonds on Tuesday.
While the previous tapping of Ksh.50 billion in August came under flowing taps of investor funds, September's re-opening of the pair of 15-year tenured bonds comes in the wake of tightening market conditions.
According to Sterling Capital, an under subscription for the combined issues at around 60 percent, an equivalent of Ksh.30 billion, is expected due to temporary tightening market liquidity and the tenor of the issues.
The squeeze in the key lending rate has seen commercial bank's excess reserves decline to Ksh.4.1 billion from Ksh.6.6 billion in the previous week.
Cytonn's Research note attributed the reversal of loose cash flows to rising commercial bank funding obligations, including tax payments with Pay as You Earn (PAYE) and banks trading cautiously in the interbank market.
Meanwhile, the tightening market conditions will serve as a timely measure to prop up the shilling's exchange rate as the squeeze assures of a much cleaner liquidity mop-up.
