Banks hold less portion of local debt as pension funds raise their stake

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The percentage of domestic debt held by commercial banks has fallen in the last quarter of 2017 as pension funds and parastatals raised their holdings at a faster pace.

Central Bank of Kenya (CBK) weekly bulletin shows that the lenders hold 54.2 per cent of the domestic debt that stood at Sh2.208 trillion on December 15, compared to 55.8 per cent at the beginning of September, when the debt stood at Sh2.118 trillion.

In nominal terms though this has translated to an increase of Sh14.6 billion in the banks’ holdings to Sh1.196 trillion.

Analysts say end of the year period usually sees banks cut buying of government securities as most have already met their yearly income target from fixed income trading.

At the same time, the percentage held by pension funds has risen from 27.3 per cent to 27.9 per cent, which in cash terms represents a rise of Sh37.7 billion to Sh616 billion.


Parastatals have recorded the largest percentage rise among the main classes of investors.

Their share has risen to seven per cent from 6.1 per cent at the beginning of September, translating to an increase of Shh25.3 billion to stand at Sh154.6 billion.

Insurance firms and individual investors have raised their holdings by 0.2 percentage points to 6.4 per cent and 4.5 per cent respectively.

The fall in bank debt holdings comes at a time when there have been heavy maturities of government securities, which has led to a fall in the total amount of outstanding domestic debt in the last two weeks from Sh2.228 trillion to Sh2.208 trillion.

Analysis by Kestrel capital shows in the current fiscal year, the total government securities maturities will top Sh1.068 trillion, compared to Sh1.05 trillion in 2016/17.

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