Bloomberg News

Kenya’s Six-Month Borrowing Costs Rise to Highest in Decade

September 14, 2011

(Updates with analyst’s comment in third paragraph.)

Sept. 14 (Bloomberg) -- Kenya’s six-month borrowing costs climbed to the highest in a decade at the biggest sale of the maturity this year as the central bank received fewer bids for the amount of debt it had offered.

The yield on the 182-day bills rose to 11.935 percent, the highest since July 2001, from 9.285 percent at a sale on Sept. 7, the Nairobi-based Central Bank of Kenya said in an e-mailed statement today. The bank issued 2 billion shillings ($22 million) of the debt, having received 3.2 billion shillings of bids, or 49 percent of the 6.5 billion shillings offered. Today’s sale is the biggest of six-month bills this year, according to a data compiled by Bloomberg.

“The low subscription indicates a market that will only take the offer at higher returns,” Fred Mweni, managing director of Nairobi-based Tsavo Securities Ltd., said by phone.

The yield on 91-day debt climbed to 11.685 percent, the highest in 10 years, at last week’s sale as inflation in East Africa’s largest economy surged for a 10th month in August, reaching 16.7 percent. The worst regional drought in 60 years boosted food prices and the shilling weakened to a 17-year low.

Kenya usually sells 182-day bills every two weeks.

“The decision to bring forward the six-month auction and offer a substantially huge amount compared to past offers is due to the maturing debt that the bank has to pay and also to provide funds for the government operations,” Peter Mwirigi, chief dealer at Nairobi-based Sterling Capital Ltd., said by phone today.

Kenya’s monetary policy committee holds a special meeting today to review efforts to curb inflation and defend the shilling.

The Central Bank of Kenya left its key lending rate unchanged at 6.25 percent on July 27, saying that inflation is being fuelled by drought that can’t be influenced by higher interest rates.

The interbank lending rate rose to 5.4599 percent from yesterday’s 5.2907 percent the bank said in a statement on its website today.

--Editors: Ana Monteiro, Emily Bowers

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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