Kenya’s central bank injected Ksh 35.40 billion of liquidity into banks stepping up efforts to shore up some of the lenders.
According to market analysts, this was in response to the heavy outflow of funds in liu of government borrowing and tax payments affecting the interbank rate.
Stephanie Kimani, Research Analyst from NCBA Bank said the weighted average overnight rate accelerated to 6.50% on Friday, up 102.74bps in the week.
The average interbank volumes declined by 2.0% to Ksh 16.9 billion, from Ksh 17.2 billion recorded the previous week.
In addition, the demand for funds as well heightened as beckoned by the surge in volumes over the interbank market and the respective increase in pricing.
“The mismatch necessitated a Ksh 35.40 billion liquidity injection by the CBK to avert extreme cash pressures for some banks. The 7-day reverse repo rate surged by 42.00bps to 8.47%,” she said in the NCBA Weekly Fixed Income Report issued Monday.
“The ongoing tightness may spill over in the coming week although this could progressively ease with the cyclical end of month government payments. Increased balance sheet enhancement activities by commercial banks could aggravate the pressure to some degree,” she adds.