For the third consecutive week, Kenya’s short-term state securities have
seen a resurgence in demand as banks steer cash into Treasury Bills amid
improving yields and mounting concerns over loan repayment risks.
Investors piled into the June 4 T-bill auction, which drew bids of Sh54.6 billion against an offer of Sh24 billion — an oversubscription of 227.4 per cent, while yields on the 91-, 182- and 364-day papers ticked up marginally.
Analysts say the shift reflects a deliberate retrenchment by banks away from riskier business and household lending after a prolonged easing cycle that drove average lending rates down to 14.8 per cent and spurred private sector credit growth to 6.4 .
With headline inflation accelerating to 6.7 per cent in May from 4.4 per cent in March, largely blamed on surging fuel costs linked to the Middle East war, lenders fear borrowers will prioritise operating costs and essentials over servicing debt.
“The squeeze is real,” a sector analyst said, noting that firms and households are likely to conserve cash for business continuity and basic needs.
That caution is compounded by government plans to tap the domestic market for up to Sh1 trillion to close fiscal gaps, a move critics warn could crowd out private sector credit by soaking up available liquidity.
Last week, the Kenya Bankers Association formally urged the Central Bank of Kenya to raise the policy rate at the Monetary Policy Committee meeting, which would mark the first hike since December 2023 and end a record ten‑meeting easing streak that brought the rate down to 8.75 per cent.
In a June 3 research note, the KBA’s Centre for Research on Financial Markets and Policy argued an upward adjustment would help anchor inflation expectations and support medium-term price stability.
The renewed appetite for government paper extended to the bond market, where reopened 15- and 25-year treasuries attracted Sh34.4 billion in bids against Sh40 billion on offer, a performance of 86 percent.
Meanwhile, Nairobi’s equity market opened in June on a brighter note: market capitalization rose to Sh3.5 trillion by the weekend, up about two per cent from late May, and all major indices closed the week higher.
NASI, NSE 25 and NSE 20 gained 1.78 per cent, 2.2 per cent and 1.49 per cent, respectively, as trading volumes and turnover also recorded notable increases.
Top risers for the week included Home Afrika, Stanbic, I&M and KCB, while Nairobi Business Venture, EABL and Uchumi saw share price declines, underscoring a market recalibrating to higher yields and rising macroeconomic uncertainty.
