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Treasury stirs up hope for cheaper bank loans

06 November 2015, 10:53 PSCU

Nairobi - National Treasury Cabinet Secretary, Henry Rotich says the decline of benchmark 91-day Treasury-bills (T-bills) at last week’s auction is an indication bank lending rates could come down soon. During last week’s auction, the T-bills fell to 19.471 per cent from the previous week’s auction of 22.4 per cent.

The two-month weighted moving average of the 91-day Treasury bill rate is a component of Kenya Banks Reference Rate (KBRR) that constitutes the interest rate charged by banks and so when it comes down, borrowers expect interest rate charges to also come down.

Read Also: Government plans to raise tax on basic commodities

Rotich says the reduction of the 91-day T-bills by almost 300 basis points heralds better times for borrowers. He said interest could come down drastically as early as January next year when Kenya’s Bankers Reference Rate (KBRR) will be reviewed. It is every six months with the last review having been in July.

T-bill auctions have been oversubscribed for the fourth straight week, with overall subscription rising to 337 per cent compared with 258.6 per cent the previous week.

As interest rates come down, the shilling has also appreciated. In October, the local currency appreciated by 3.6 per cent against the US dollar to close at Sh101.80 from Sh105.30 at the end of September.

The improved performance has been attributed to inflows of dollars from offshore investors chasing government debt.

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- News24


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