Bloomberg News

Kenyan Bill Bids Exceed Supply by 5.8 Times on Yield Allure

June 23, 2011

June 24 (Bloomberg) -- Investors in Kenya bid for 5.8 times the amount of 91-day bills on offer as yields at an almost nine- year high attracted demand for the debt.

The central bank accepted 5.8 billion shillings ($64 million) of the 11.5 billion shillings of bids received, it said in an e-mailed statement yesterday. It originally offered 2 billion shillings. The average yield on accepted bids fell to 8.995 percent, compared with 9.006 percent at last week’s sale. The yield is within two basis points of a nine-year high reached on June 9.

Kenya, the world’s largest exporter of black tea, is grappling with 13 percent inflation, up from 3.2 percent in October, as corn, the nation’s staple food, soared 31 percent. The shilling is the world’s third-worst performer against the dollar this year, depreciating 10 percent.

“The central bank is determined to cap the yields and will keep taking bids that are within its desired levels, an indication that the market will have to factor in their pricing,” Karanja Ndung’u, a fixed-income dealer at Nairobi based Tsavo Securities Ltd., said by phone today.

The central bank will “consider further tightening of monetary policy to tame future inflation and stabilize the exchange rate,” Governor Njuguna Ndung’u told reporters yesterday in Nairobi. “Once we analyze the inflation crisis and see that it is not subsiding, we have room to take monetary policy further.”

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.

East Africa’s biggest economy will boost spending by 15 percent to 1.15 trillion shillings in the year through June 2012, increasing spending on roads and energy, Finance Minister Uhuru Kenyatta said in his budget speech on June 8.

The deficit 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.

--Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Johnstone Ole Turana in Nairobi at jturana@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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