Kenyan Treasury bill yields are expected to continue their decline after inflation fell in April and the Central Bank of Kenya (CBK) held its key lending rate. In lieu of this, investors are hoping for longer-dated bonds with the expectation that the CBK will finally cut the Central Bank Rate (CBR) at its next Monetary Policy Committee (MPC) meeting.

At this week’s auction, the yields on Treasury bills are expected to fall further but perhaps at a slower pace than they did at last week’s auction, a day after the CBK held its benchmark interest rate at 18% despite a drop in inflation.

It is expected that the CBK will auction a longer tenor bond in May since investors were betting that this would be extremely attractive to investors as they attempt to lock in profit from reasonably high yields before they fall further as the CBK may lower the CBR next month.

The CBK held its Central Bank Rate at 18% on Thursday, a few days after inflation came in at 13.06% in April from 15.61% in March and lower than investors had anticipated.

At last week's Treasury bill auction, the weighted average yield on 182-day paper fell by nearly two percentage points to 14.78%, while the 91-day bill came in at 13.38%, down from 14.99% previously. Nonetheless, both were oversubscribed.

The CBK is scheduled to auction 91-, 182-day and 364-day Treasury bills worth KES 6 billion this week.