Bloomberg News

Kenya’s 3-Month Bill Yields Rise to Nine-Year High at Sale

June 10, 2011

(Updates with shilling rate in final paragraph.)

June 10 (Bloomberg) -- Kenya’s three-month borrowing costs climbed to the highest in more than nine years at a sale where demand exceeded the amount offered by almost nine-fold.

The yield on 91-day Treasury bills rose to 9.016 percent at yesterday’s sale, the Nairobi-based Central Bank of Kenya said in an e-mailed statement. That’s the highest since May 13, 2002, and compares with a yield of 8.798 percent at the previous auction. The bank, which had offered 2.5 billion shillings ($29 million) of the debt, received 21.9 billion shillings of bids and accepted 17.1 billion shillings.

“The money-market yields have risen to levels where investors are more than willing to actively participate in the auctions despite a tight money-market environment,” Ronald Olembo a fixed-income dealer at Nairobi-based CfC Stanbic Bank Ltd., said in a phone interview from the city.

Kenya will boost spending by 15 percent to 1.15 trillion shillings in the year through June 2012, increasing expenditure on roads and energy, Finance Minister Uhuru Kenyatta said in his budget speech yesterday. The deficit in East Africa’s biggest economy will widen to 7.4 percent of gross domestic product. Domestic borrowing is targeted at 119.5 billion shillings in the next financial year, down from 125 billion shillings this year, Kenyatta said.

Kenyan government borrowing costs are increasing as the East African nation’s inflation rate jumped to a 25-month high of 13 percent in May. Price growth is expected to advance further this year as dry weather curbs agricultural production, central bank Governor Njuguna Ndung’u said on June 6.

Kenya’s monetary policy committee raised the benchmark interest rate by a quarter percentage point to 6.25 percent and the cash reserve ratio by the same amount to 4.75 percent, central bank said on May 31.

The shilling weakened 0.1 percent to 87.73 against the U.S. dollar at 10:03 a.m. in Nairobi today. A close at that level would be the lowest since March 1994, according to Bloomberg data.

--Editors: Ana Monteiro, Linda Shen.

#<795565.3911643.># -0- Jun/10/2011 07:09 GMT

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