The yields on government securities are now above 12.0%, with the Treasury bill auction results released yesterday showing that the yields on the 364-day, 182-day, and 91-day papers are 12.3%, 12.2%, and 12.0%, respectively.
Read more: Government looking For long Term Securities To Ease Domestic Debt
Earlier in November 2022, President William Ruto noted that the government would not be borrowing at a rate higher than 10.0% from the local market. However, the fruits of government interventions to address the rising yields are yet to be seen.
Read more: Kenyan Government Plans to Borrow More Domestically
Investors continue to demand a higher return on their investments, considering the high cost of living due to elevated fuel and food prices. The high yields are also an indication that investors are viewing investments in government securities as high-risk.
Additionally, the treasury has significantly increased its domestic borrowing target by 37.0% to Kshs 0.6 tn from Kshs 0.4 bn in the financial year 2022-2023 while at the same time reducing the foreign borrowing target by 66.8% to Kshs 0.1 bn from Kshs 0.4 bn the previous year.
Read more: Respite for The Kenya Government as the 7-Year Infrastructure Bond Is Oversubscribed
The high yields have worked in the government’s favour, with the government closing FY 2022–2023 at 34.3% above its domestic borrowing target of Kshs 428.3 bn by having a net borrowing position of Kshs 568.7 bn.
However, the high yields will definitely have a huge impact on the performance of other asset classes and investments such as Equities, fixed deposits, Money market funds, and real estate-regulated funds, among others.
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