Today the Central Bank of Kenya (CBK) will auction KES 2 billion worth of 182 day Treasury bills. The auction comes on the same day that the 5 billion shilling bond on offer closes. This comes after last week’s auction of Treasury Bills worth KES 4 billion.

Last week the 182 day Treasury bills were oversubscribed by 167%. This high subscription percentage could be interpreted as an effort by investors to benefit from the high interest rates before they begin to fall. Market sentiments are that the yield on government securities will begin to decline as the tough monetary stance taken by the CBK over the last few months has yielded positive results and also as the bank tries to stabilise the Kenya shilling. The yields on last week’s auction dropped to 12.078% from 13.076% at the previous auction.

At this auction it will be worthwhile to observe the number of bids the CBK will receive although it is highly possible that it may be much less than the 137% observed last week.

Tomorrow the CBK will auction 91 day Treasury bills worth KES 2 billion as well and it is expected that the yield on these will fall even further than the 10.075% level observed last week.