Liquidity Strain Likely to Soften on Bond Maturities

The Central Bank of Kenya (CBK) has kept rates below 14 per cent and flattened the yield curve for 15-year and beyond tenors.

Central Bank of Kenya Kisumu Branch I Khusoko

The liquidity situation is expected to ease this week on bond maturities and coupon payments estimated at Ksh 47.96 billion.

The previous week, the liquidity conditions tightened following outflows to the central bank for the settlement of IFB1/2021/21. 

This was also partly attributable to the banks trading cautiously in the interbank market in order to meet their CRR requirements for the cycle ending 14th September. This pushed the weighted average overnight rate to 5.47 per cent – it’s the highest level since late April 2021. 

According to financial analysts, the central bank injected nearly Ksh26.00 billion into the market to support the banks.

For the week, the NCBA Research team says, “However, some tax settlements in the week and early circle balance build-up could somewhat offset the positive cash disposition, delaying the return to the Pre-IFB equilibrium. Barring any significant government payments, the overnight rate could hold above 4.50 per cent in the week.”

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