In the most recent T-Bill auction, the 182-day T-Bill rate fell 421 basis points to 12.28 percent while the 364-day T-Bill rate fell 351 basis points to 13.62 percent from 17.1 percent.
Since rates started creeping up in April, the current rates for both T-bills are the lowest recorded since the month of August.
Notably, oversubscription for the 182-day and 364-day bills stood at 279.5 percent and 286.49 percent respectively.
Last week the Treasury reduced interest rates for both the Treasury instruments and the interbank rates. The 91-day T-Bill dropped from 19.47 percent to 13.73 percent, 182-day dropped from 21 percent to 16.5 percent, the 364 day dropped from 21.2 percent to 17.1 percent while the interbank touched a low of 11 percent.
Under the current frame work, banks’ pricing of loans is based on Kenya Bankers Reference Rate – computed as an average of the Central Bank Rate (CBR) and the two-month weighted moving average of the 91-day Treasury bill rate.
Lenders then add a premium ‘K’ depending on customer risk profile. KBRR is revised every six months meaning lenders and borrowers face a lag time before the effects of rates revisions are felt.
Additionally, lenders have to give a one month notice before revising rates for borrowers.