CBK Weekly Bulletin

August 31, 2012

Highlights

The money market was liquid during the week ending August 29, 2012. The Central Bank sterilized the excess liquidity in the money market by mopping Ksh 24.2 billion through repo securities against maturities of repo and term auction deposits securities held by commercial banks of Ksh 15.5 billion and Ksh 2.4 billion, respectively.

The average interbank rate increased to 8.46 percent during the week ending August 29, 2012 compared with 8.11 percent in the previous week.

The Kenya Shilling depreciated against all major international currencies in the week ending August 30, 2012. Against the US dollar the Kenya Shilling ended the week at an average of Ksh 84.08 per US dollar down from Ksh 84.01 per US dollar in the week ending August 23, 2012.

The usable official foreign exchange reserves held by the Central Bank increased from US dollar 5,103 million (equivalent to 4.12 months of import cover) as at August 23, 2012 to US dollar 5,121 million (equivalent to 4.14 months of import cover) in the week ending August 30, 2012.

The Government offered for sale Treasury bills worth Ksh 15.0 billion during the week ending August 31, 2012. A total of Ksh 13.7 billion was accepted out of Ksh 19.0 billion bids received.

Gross Government domestic debt increased by Ksh 16.7 billion to stand at Ksh 875.5 billion on August 24, 2012, from Ksh 858.8 billion at the end of June 2012. During the week under review, gross government domestic debt declined by Ksh 4.1 billion, largely on account of Treasury bonds.

Stock market performance was robust in the week ending August 30, 2012 as reflected by gains in most of the market indicators. All activities in equities and bonds were up except for the Equity Turnover, which edged down 5.4 percent. The NSE 20 Share Index was up 57.41 points, while the Nairobi All Share Index (NASI) was up 0.86 points. The FTSE NSE 15 Index and FTSE NSE 25 Index were up 1.75 and 1.58 points respectively. Supply of shares increased 48.0 percent, while Market Capitalization was up 1.0 percent.

Similarly, the bonds market activity edged up recording a 71.1 percent increase in turnover.

CBK Weekly Bulletin

August 24, 2012

Highlights

The money market was relatively liquid during the week ending August 22, 2012. The Central Bank sterilized the excess liquidity in the money market by mopping Ksh 15.5 billion through repo securities and Ksh 7.9 billion through term auction deposits against repo maturities of Ksh 20.0 billion and term auction deposits maturities of Ksh 2.1 billion

The average interbank rate decreased to 8.11 percent during the week ending August 22, 2012 compared with 8.90 percent in the previous week reflecting increase of liquidity in the money market.

The Kenya Shilling exchange rate depicted mixed performance against major international currencies in the week ending August 23, 2012. Against the US dollar the Kenya Shilling depreciated marginally to trade at an average of Ksh 84.01 per USD compared with Ksh 83.98 per USD in the week ending August 16, 2012.

The usable official foreign exchange reserves held by Central Bank increased from USD 5,080 million (equivalent to 4.16 months of import cover) as at August 16, 2012 to USD 5,103 million (equivalent to 4.17 months of import cover) in the week ending August 23, 2012.

The Government offered for sale Treasury bills and bonds worth Ksh 18.0 billion during the week ending August 24, 2012. A total of Ksh 25.1 billion was accepted out of Ksh 45.0 billion bids received.

Gross Government domestic debt increased by Ksh 20.8 billion to stand at Ksh 879.6 billion on August 17, 2012, from Ksh 858.8 billion at the end of June 2012. During the week under review, gross government domestic debt increased by Ksh 2.4 billion, on account of Treasury bills.

Stock market performance was strong in the week ending August 23, 2012 as reflected by gains in most of the market indicators. The two key indices; NSE 20 Share Index and NASI were on the upward trend closing at 3,817.70 points and 84.01 points, respectively.

Market capitalization and equity turnover increased by 0.5 percent and 16.4 percent, respectively. The supply of equities declined by 14.2 percent which may be attributed to their being a public holiday on 20th August 2012.

The bonds market recorded a 73.5 percent increase in turnover during the week.

VAT Bill 2012 – An Economic Suicide!!!

In the past month, the Finance Minister Robinson Njeru Githae introduced into parliament a bill dabbed the VAT Bill 2012, with an intention of introducing the standard tax rate (16%) to goods which were formerly zero-rated.

Some of the items to be affected by this bill include agricultural and food items. Pesticides, insecticides, fertilizers, livestock feeds, water pumps, seeds, and gin cotton are some of the agricultural items to be affected. Milk, wheat, maize, cream and bread are the food items that would be affected on the other hand.

The bill has however been shelved in the mean time following a protest against the bill from farmers, MPs and other lobby groups. They all view the bill to be ineffective and coined for some ill motives. They see this bill as a threat to the food security in the country since it has the potential of raising food prices.

Speaking in a forum organized by ICPAK to discuss the bill, KRA Commissioner-General John Njiraini however supported the bill saying that it was meant to enlarge KRA`s tax base. Continue reading “VAT Bill 2012 – An Economic Suicide!!!”

Repurchase Orders – (Repos)

Repurchase orders or repos as commonly referred to, are an investment tool that is not known to many people; just like the Forex market too. Probably due to its limited use, many people may not even have come across it anywhere.

A repo involves a short-term loan transaction that involves two parties. One party has urgent financial needs and therefore they would like to borrow some cash. The other party has cash to lend and they are looking for someone to lend to. When the two parties come together, a transaction takes place whereby the lender ends up gaining some money by the end of it.

The transaction that takes place involves the borrower selling a repurchase order to the lender (buyer of the repurchase order) who then lends them the money they needed. The repurchase order is a document that contains the contract details of the transaction whereby the buyer has lent money to the seller of the repo; with an intention of reselling back the repo to the seller at some future date at a higher price.

The buyer of the repo therefore makes money by reselling the repo back to the initial seller at a higher price than they had bought it. The difference between the buying and selling price of the repo is what makes profits for the buyer of the repo. In other words: Continue reading “Repurchase Orders – (Repos)”

The Libor Scandal Explained

Many of us have been hearing this Libor Scandal story for a while now but we seem not to understand what it is all about. At times we could get confused and wonder why it is taking center stage in the global financial market.

In that connection, it is only timely to inform you that several other banks have received subpoenas from the New York and Connecticut attorney generals on the same matter. The banks include: Barclays bank, UBS, RBS, Deustche bank, HSBC, JP Morgan and Citigroup.

More regulatory bodies are also delving into the matter to try and unearth those who worked in collaboration with Barclays bank in this scandal.

In order to understand better what this Libor Scandal is, here is a summarized and simple to understand explanation that I sourced out for you….Explaining the Libor scandal

(courtesy of BBC)

CBK Weekly Highlights – August 10, 2012

The money market was relatively liquid during the week ending August 8, 2012. The Central Bank sterilized the excess liquidity in the money market by mopping Ksh 13.2 billion through repo securities and Ksh 1.1 billion through term auction deposits against repo maturities of Ksh 9.2 billion and term auction deposits maturities of Ksh 9.6 billion.

The average interbank rate decreased to 10.53 percent during the week ending August 8, 2012 compared with 11.31 percent in the previous week reflecting improved liquidity in the money market.

The Kenya Shilling depicted mixed performance against major international currencies in the week ending August 9, 2012. Against the US dollar the Kenya Shilling appreciated by 0.13 percent to trade at Ksh 84.22.

The usable official foreign exchange reserves held by the Central Bank decreased from US dollar 4,976 million (equivalent to 4.07 months of import cover) in the week ending August 2, 2012 to US dollar 4,967 million (equivalent to 4.06 months of import cover) in the week ending Continue reading “CBK Weekly Highlights – August 10, 2012”

Developing Good Financial Habits

The best way to manage your personal finances is by creating good financial habits that support your financial goals. This involves inculcating into your daily life those good financial habits such that they become an automatic routine in your life. The things involved here could be: timely settlement of all your dues, keeping track of your daily expenses, regular deposits to your savings account etc.

They say that it takes 21 days to change a daily behavior into a habit. That having been said, you can then see that it really takes effort to have a make-over in your financial habits. The difference between those who change successfully and those who fail on the way is that those who change successfully do the following:

  • Keep a record

Having a daily journal of your new financial behaviors will help you in developing those behaviors into habits. Record all your expenses, savings and any achievement you`ve made towards the attainment of your financial goals. This will keep you motivated and help you identify deviations from the planned strategy early enough, for corrective measures to be taken.