It is becoming increasingly difficult to maintain the expansionary policy but CBK is up to the task as reflected in this week’s summary of open market operations. CBK pumped in a massive Ksh17 bn in cash on one day… this is reserve money that CBK conjures up when it writes a check on itself of which banks can leverage on (see the latest cbk weekly bulletin).
However, the injection came in on Feb 8th during the 91-day&364-day T-bill auction (see post 28 above)…we had noted the surprising outcome that was the 100% allocation to bidders…but maybe not so unusual now given bidders only put up Ksh15.7 bn, so CBK had provided banks with excess capacity while there was actually a net repayment (so the injection must have been for the bidders benefit).
And who were the bidders? Probably banks because who else wud buy T-bills when their returns are declining and why else wud an injection be required. CBK continues to print money & maintain lower rates…last week Thursday, the interbank rate hit 1.98% again and reverse repo rate is at a 9 month low at 2.91%.
It’s time to start looking at the financials my friends…thinking like those contrarian investors, like Nassim Taleb, who are finding ways to profit from the money being pumped into the system…I’m looking at the ones that stand to gain the most from this scenario of wide net interest margins and lower loan loss provisions…in terms of cost leadership, retail banks:- Barclays Bank, KCB and Equity Bank come to mind.
More from Taleb and Fabor
http://www.zerohedge.com...will-default-their-debt
http://moneynews.com/Str...ett/2010/02/11/id/349637“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden