Low interest rates stifle Kenyan securities investorsBy XINHUA | Monday, May 14 2012 at 10:36
Interest rates on government securities in Kenya continue to fall, discouraging investors, especially individuals, from buying the once lucrative papers.
The rates for both short-term and long-term government securities have declined significantly since January. For instance, the 91-day Treasury bills rates have declined from as high as 21 per cent in January to 13 per cent on May 7.
And the rates from the short-term security are expected to fall further on May 14, to 11 per cent, according to the Central Bank of Kenya (CBK) when it auctions the papers next week.
The downward trend has been registered across the board on all government securities, though in different variances, with 91-day and 184-day Treasury bills leading in interest rates fall.
Government securities, namely Treasury bills and bonds, have been the most rewarding investment for investors in the past months, especially after fortunes at the East African nation's stock market tumbled.
Many investors trooped from Nairobi Securities Exchange to CBK to buy government papers.
But with the current trend, investors are caught between a rock and hard place, with many individual buyers choosing to abstain from trading in the bills.
Analysts attribute the downward trail to a move by the Central Bank to retain its benchmark lending rate at 18 per cent, which has seen inflation in the East African nation drop and exchange rates stabilise.
"There is need to maintain the current monetary policy stance to ensure that inflation continues to decline towards the target and to sustain the current exchange rate stability. The committee therefore decided to retain Central Bank Rate at 18 per cent," said CBK in a statement on May 3 after its Monetary Policy Committee meeting.
Inflation in Kenya has dropped from 19 per cent in January to 13 per cent, according to the latest data from Kenyan National Bureau of Statistics.
The decline in inflation, according to analysts, has consequently led to the drop in interest rates of government securities.
- Why Obama is visiting Tanzania
- Another politician for the Kenya Cabinet
- Kisumu, where some folks are eating well, while others are going hungry
- The girl who met Gaddafi 'in hell'
- Achebe’s body arrives home
- Kenyan call girls go high-tech
- Eritrea's Afeworki: reviled and revered ex-rebel
- Equatorial Guinea to finance key Liberian projects
- After Berlin Man, two reported cured of HIV in Kenya
Beyond the ballot