Poll uncertainty weighs down on debt market

By James Anyanzwa

The Government sponsored debt securities plummeted 60.9 per cent during last week’s auction, as investors remain cautious ahead of the new constitutional dispensation.

The Central Bank of Kenya (CBK) said the subdued performance posted during the auction of August 5, may have been on account of the wait and see attitude displayed by the market participants as Kenyans participated in the national referendum to pass the new constitution on August 04.

During the auction, the Government offered for sale 182-day Treasury bills worth Sh6 billion, but received bids totaling Sh3.7 billion, all of which were accepted by the Government.

Brokers at the Nairobi Stock Exchange. In contrast with the debt market, performance at the equities market was not weighed down by poll uncertainties. [Photo:FILE]

The proceeds of the auction were used to meet part of maturing Treasury bills worth Sh11.9 billion falling through during the week under review. The cut-off rate for the 182-day Treasury Bill remained unchanged at 1.9 per cent posted on August 5.

Money market

According to CBK’s weekly economic indicators report, the average inter-bank rate rose by four basis points to 1.65 per cent, up from 1.61 per cent in the previous week.

The volumes traded declined to Sh44.3 billion from Sh59.1 billion in a similar period.

The money market was liquid during the week, however, CBK opted to stay out of the market.

In the forex market, the shilling on average strengthened against the US dollar and the Euro during the week ending August 6.

Against the US dollar and the Euro, the local currency appreciated to exchange at Sh79.98, down from Sh80.83 per US dollar recorded in the previous week, and Sh105.11 compared with Sh105.15 per Euro. The shilling appreciation partly reflected positive market sentiment on the outcome of the referendum vote on the proposed constitution.

The local currency rally was also aided by the weakening of international currency during which the dollar depreciated against the Sterling Pound and the Euro due to concerns about the US recovery.

Performance at the equities market, however, improved with turnover increasing by 56.1 per cent.

The NSE 20 Share Index gained 269.15 points to settle at 4,667.47 points on August 5, from 4,398.32 points on July 29.

The Nairobi All Share Index gained 5.22 points to settle at 102.16 points compared to a rise of 96.94 points recorded in the previous week.