Kenyan Treasury bill yields to rise, Nigeria’s to fall

The yields on Kenya‘s Treasury bills and a bond on sale next week are expected to rise, but at a slower rate, traders said.

The central bank will auction 91-day, 182-day and 364-day Treasury bills worth a total 12 billionKenyan shillings ($120 million) in two auctions next week.

The bank will also auction a one-year amortised Treasury bond worth up to 20 billion shillings next week.

“On the Treasury bills, they will continue to gain consistently in terms of the (weighted) average yields stabilising at levels of around 22, 23 percent. It’s nearing the top,” a fixed income trader at one brokerage house said.

At this week’s sale, the weighted average yield on 91-day Treasury bills rose to 22.133 percent from 21.353 percent last week, while that on the 182-day bill jumped to 21.840 percent from 21.607 percent last week.

The yield on the 364-day Treasury bills rose to 21.882 percent from 21.498 percent last week.

NIGERIA

Yields on Nigerian bonds are expected to fall, dropping near a 1-year low with the interbank market awash with liquidity as central bank cash injections filter into the bond market.

Traders said yields across maturities have dropped this week. The central bank injected 280 billion naira ($1.4 billion) into the banking system from retired open market bills, increasing liquidity to over 1 trillion naira.

Traders expect liquidity totalling around 600 billion naira to hit the banking system within the next two weeks, traders said.

Traders say most is being invested in fixed income assets by commercial banks and pension funds, driving yields lower.

The 10-year bond yield, which has traded as high as 17.4 percent, fell 20 basis points on Friday to 12.90 percent. At a primary auction this week, the benchmark note yielded 13.87 percent.

The liquidity surge has gone on for over three weeks, with the central bank unwilling to issue new open market bills to mop up the funds, wanting banks to lend to businesses.

“Markets will continue to be awash with liquidity (but) this is not long-term funds for lending until banks know what the central bank wants to do,” one trader said.

The central bank has kept its benchmark lending rate at 13 percent but lowered its cash reserve requirement to 25 percent from 31 percent, seeking to get lending flowing in Africa’s biggest economy after lower oil prices hit the currency. ($1 = 198.9800 naira) ($1 = 102.3500 Kenyan shillings)