Bond auction changes cancelled by Kenya's central bank

Sep 16, 2010

Kenya's central bank has reversed plans to implement new bond auction legislation after it was met with widespread disapproval by traders.

Reuters reports the bank will no longer be introducing rules that would have let it accept bids submitted above the cut-off rate, but pay interest at a lower rate. According to the news agency, the decision was reached after a meeting with market representatives yesterday (September 15th), which also saw the bank agree to reveal the highest and lowest bids it received for bond auctions.

The move has been welcomed by bond dealers, with Bloomberg noting many were against the proposed changes. Speaking before the financial institution announced its decision, Fred Mweni, Bond Traders' Association Chairman, said it would "give the central bank power to decide the rate they want to give - and most people don't want that". "The entire market is against it," said Mr Mweni, who was invited to the central bank's meeting.