Bloomberg News

Kenya’s One-Year Yields Advance to Record on Weakest Demand

October 05, 2011

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

Oct. 5 (Bloomberg) -- Kenya’s one-year bill yields climbed to a record as inflation runs at more than triple the target rate, with investors bidding for 4 percent of the amount offered, the weakest demand since the debt was first sold.

The yield on the bills rose to 14.449 percent from 12.536 percent at a sale on Sept. 7, the highest since it was first offered in August 2009, the Central Bank of Kenya said in an e- mailed statement today from Nairobi, the capital. It issued 182.2 million shillings ($2 million) of 364-day bills, having received 218.5 million shillings of bids, or 4 percent of the 5 billion shillings offered.

“The yields are expected to rise due to the prevailing high inflation rates,” Fred Moturi a fixed-income dealer at Nairobi-based Sterling Capital Ltd., said in a phone interview before the auction.

Kenyan inflation accelerated for the eleventh consecutive month in September to 17.3 percent, more than triple the 5 percent target, compared with 16.7 percent in August, on rising food and fuel costs.

The central bank today raised its benchmark rate by a record 400 basis points, signaling a policy shift in a bid to combat inflation and curb the shilling’s slump to a record-low 104.2 per dollar, reached on Sept. 27. The rate was increased to 11 percent, the bank said in an e-mailed statement today. Forecasts ranged from 7.5 percent to 10 percent.

The bank also issued 3.5 billion shillings of 182-day bills, with they yield rising to 14.283 percent, the highest since February 2001, from 13.493 percent at the previous sale, the central bank said.

It received 4.07 billion shillings of bids, or 1.4 times more than the 3 billion shillings offered.

--Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Johnstone Ole Turana in Nairobi at

To contact the editor responsible for this story: Antony Sguazzin at

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