The yields on Kenyan treasury bills and a 10-year bond are expected to inch higher, while Nigerian bond yields are expected to fall after the central bank held its key lending rate.
The yields on Kenyan treasury bills and a 10-year bond are expected to rise slightly, with the bond expected to see strong interest because it offers an attractive yield in a money market that is awash with cash.
The Central Bank of Kenya will auction 91-day, 182-day and 364-day paper worth a total 12 billion shillings ($135.44 million) at next week’s auctions.
The bank will also auction a 10-year Treasury bond worth up to 15 billion shillings.
The weighted average yield on the 91-day Treasury bill rose to 8.637 percent at this week’s auction from 8.219 percent last week. The yield on the 182-day paper increased to 8.604 percent from 8.550 percent, while that on the 364-day day bills rose to 10.276 percent from 10.163 percent.
Traders said they expect a moderate rise in the rates, especially given that about 15 billion shillings’ worth of bonds were maturing this month.
The market is awash with the local currency due to renewed government spending and maturing bonds, traders said.
“Treasury bill rates will inch up marginally on the back of the amount of maturities that the market is experiencing this month,” a senior trader at one commercial bank said.
However, the trader said the yields would be capped because the central bank was likely to reject overly high bids.
Traders said they also expect the yield on the 10-year bond to rise. At the last sale of 10-year paper in January, its weighted average yield slipped to 12.180 percent from 12.371 percent previously.
“The yield for the Treasury bond might go up slightly. Talking to guys in the market, I think most of them are going to bid at high levels, especially on the 10-year,” a trader at another commercial bank said.
Yields are seen falling next week after the central bank retained its benchmark rate on Friday. Traders said the bond market was attractive for buyers with the benchmark rate held at 12 percent.
“Yields should start coming down next week in the aftermath of the rate decision and the expected increase in the liquidity level,” one trader said.
Nigerian bond yields have risen by around 10 basis point on average this week following profit taking by both offshore and local pension funds following a fall in the price of oil, and concerns on the naira.
The local currency has dropped by around 3 percent in the year to date, weakening to its lowest level in more than three months on Thursday due to demand pressure and dollar squeeze.
At the bond auction on Wednesday, yields rose marginally on the 3-year to 11.49 percent from 11.12 percent at the previous auction. The 10-year tenor paper fetched 12.23 percent compared with 12.22 percent in August.
“The market was a seller market this week, mostly by offshore investors taking profit and playing safe because of the falling naira value,” one dealer said.