FILE PHOTO | NMG 

Investors offered a massive Sh105.14 billion in this month's Sh40 billion, five and 10-year Treasury bond sale, due to a heavily liquid market and short tenors that presented an attractive investment for bank sector players.

The results of the auction done last week show the Central Bank of Kenya (CBK) took up Sh49.32 billion — less than half of the offered funds — in what reflects the fact that the Treasury has already achieved its domestic borrowing target of Sh390 billion for the fiscal year ending June 30.

"We are optimistic that CBK will raise more than the required amount to offset all the obligations falling due this month on account of the high liquidity in the market and preference by banks to lend to the government compared to extending credit to their customers," said the investment bank in its pre-auction note.

"It is likely that CBK will have the ability to plug some of the raised cash from the domestic debt market into budgetary support as we expect CBK to raise more funds from the targeted issues due to high liquidity and great appetite for short-term papers."

Government payments as the fiscal year ends have helped push cash into circulation, while the lowering of the cash reserve ratio for banks in March left lenders holding excess liquidity.