The falling interest rates offered by treasury bills are set to switch investors towards more attractive bonds and equities at the Nairobi Securities Exchange, analysts say.

“The fall in yields is set to shift the secondary bond market to a seller’s market as bond valuations look attractive.”, said Standard Investment Bank (SIB) in a research note.

In this week’s auction, the 91 day and 182 day treasury bills offered their lowest rates in 15 months at 7.80 percent and 9.35 percent respectively. In comparison, they offered 20.8 and 20.9 percent in January when inflation was still in double digits.

Here is a comparison of current Treasury bill yields to those in January with a 100,000 shilling investment (the minimum allowed):

[caption id="attachment_19207" align="aligncenter" width="630"] Source: FILE[/caption]

Read here to find out how to calculate the yield on treasury bills.

“In addition to this, the low yield will prompt investors to shift more funds from the money market into the equity market where the NSE 20 Index is up 21% YTD (since January).”, SIB added. Read here to learn more about the NSE 20 Share Index.

SIB expects that treasury bill interest rates will fall further on reducing inflation which is currently at its lowest since January 2011 at 6.09 percent.