Banks raised their holdings of government debt by Sh46 billion in May eating into the share held by retail investors.
Latest Central Bank of Kenya data shows that the lenders now account for Sh1.134 trillion or 56.2 per cent of domestic debt, which in total stands at Sh2.018 trillion.
They held 55.2 per cent at the end of April, when total debt stood at Sh1.974 trillion.
Other investors, who include individuals, saccos and investment clubs, held 2.4 per cent of total debt translating to Sh48.4 billion at the end of May.
They held 3.9 per cent in April, which at the time was equivalent to Sh77 billion.
“On face value, it means that banks are putting more money into government securities than the other investors.
“In addition, liquidity in the market is quite high, and a number of banks which had not picked up their buying of securities at the beginning of the year are doing so in the second quarter,” said NIC Securities fixed-income analyst Dianah Irungu.
“The weekly auction target for Treasury bills has also been raised from Sh16 billion to Sh24 billion, and banks are the likeliest to have the kind of ready money to take up the additional amount.”
The share held by pension funds has risen from 27.5 to 27.9 per cent, that of parastatals from 6.5 to 6.6 per cent while insurance firms’ holdings have dropped from seven to 6.9 per cent.
The fall in the share held by the other investors is also an indication that some are not rolling over their maturing securities tight-fisted banks a free rein.
Since the capping of interest rates on customer loans, banks have been pushing funds to government securities, attracted by the risk-free nature of this debt now that they are unable to add a risk premium on credit, which has fallen.
Top tier lenders, which control the bulk of liquidity in the banking sector, have especially turned to government securities as an alternative.
In the one year to March 2017, Equity had increased its government securities holdings by Sh63.5 billion, while Standard Chartered had raised its holdings by Sh33.3 billion and DTB
by Sh28.2 billion.
The banks are likely to raise their holdings even further in coming months, given that there are maturities worth Sh496 billion between June and December this year.
Credit: Business Daily