The Kenya Shilling has continued to shed its value against the US Dollar, having lost 0.58 percent in value for the past week.
Friday’s data from the Central Bank of Kenya (CBK) indicated the shilling exchanged at 148.80 units against the dollar, compared to 147.94 the previous week.
The shilling is also expected to suffer more due to the need for government debt servicing which continues to put pressure on forex reserves given that 66.8 percent of Kenya’s external debt that is US dollar-denominated as of April 2023 will pile more pressure on the Kenyan shilling.
This is evident in the re-opened two-year and a ten-year Ksh.15 billion Treasury Bond in September which investors heavily avoided.
Out of Ksh.15 billion auction, only Ksh.3.4 billion was achieved with Ksh.3.3 billion accepted.
A two-year tap sale attracted Ksh.2.63 billion compared to a ten-year Bond which attracted a mere Ksh.814 million.
Investors heavily avoided the September Tap Sale in the wake of duration risks posed by rising interest rates
This drags the government’s effort to service debt against the backdrop of rising interest rates in the market.
Kenya has shifted focus on short-term bonds by the National Treasury to match issuances of government securities to investor interests which have been stuck on short-dated issues.
On October 4, 2023, the CBK, Treasury’s fiscal agent re-opened two- and five-year bonds in a bid to raise Ksh.35 billion from the domestic market.
The two, whose tenors are set at 1.8 and 4.8 years respectively have a fixed coupon rate and will be on offer for a week lasting October 11, 2023.
The two papers have coupon rates of 16.9723 and 16.844 percent respectively.