WEEKAHEAD-AFRICA DEBT-Kenyan yields seen holding steady

NAIROBI, July 25 Fri Jul 25, 2014 11:59am EDT

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NAIROBI, July 25 (Reuters) - Yields on Nigerian debt are expected to fall in the week ahead while those in Kenya are seen steadying, traders said.

NIGERIA

Yields on Nigerian local debt are seen falling next week, extending this week's losses due to excess liquidity in the banking system from the disbursal of monthly budgetary allocations to government agencies.

"Yields have dropped as much as 12 basis points this week in response to prevailing excess liquidity in the banking system ... but we think the market will be a bit calm next week," a dealer at Guaranty Trust Bank said.

"We don't expect yields to drop rapidly, but maybe just slightly lower," the dealer said.

The effect of Open Market Operations (OMO) and shorter trading days should limit the slide next week, traders said.

Nigeria's market will be closed until Wednesday due to a public holiday to mark a Muslim holiday.

KENYA

The yields on Kenyan Treasury bills are expected to hold broadly steady next week, although extra liquidity might put slight downward pressure on 182-day or 364-day bill yields.

"The change will be very marginal," said Alex Muiruri at Kestrel Capital, adding that delayed government payments to local authorities expected to come next week could increase shilling liquidity.

He said 91-day bill yields were likely to hold firm.

The central bank will offer 91-day, 182-day and 364-day Treasury bills worth a total of 9 billion shillings ($102.68 million) at next week's auctions.

"We expect interest rates to hold where they are right now," said Peter Njuguna, head of fixed income at KCB Bank Group.

At this week's sales, the weighted average yield on the 91-day Treasury bill fell to 8.694 percent from 9.274 percent.

The yield on the 182-day Treasury bills eased to 10.060 percent from 10.430 percent a week earlier, while that on 364-day bills dropped to 10.330 percent from 10.558 percent. ($1 = 87.6500 Kenyan shillings) (Reporting by George Obulutsa and Oludare Mayowa; Editing by Edmund Blair and Susan Fenton)

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