Liquidity in the system is set to get tighter, with the deadline approaching for payment of the third instalment of 30% corporate tax.
According to NCBA, the impact may be more visible on the interbank overnight rate, with little spillover to the broader curve.
This could see it rising further towards 6.0% in the month although T-bill yields are unlikely to materially deviate from the current trend given the cyclicality of this tightness.
Last week, liquidity in the money market tightened, with the average interbank rate increasing marginally by 0.1% points to 5.0%, from the 4.9% recorded the previous week, attributable to the government payments which were partly offset by tax remittances.
According to the Central Bank of Kenya’s weekly bulletin released on 12th March 2021, commercial banks’ excess reserves came in at Kshs 11.7 billion in relation to the 4.25% Cash Reserve Ratio.