have u asked yourself what the cost of discounting GoK paper is? majority of KCBs paper is in HTM which cannot be sold without tainting the book? and how did ndungu arrive at the conclusion that the solution was to hike rates, mkt is tight as hell(onite at +14%) but kes is still above 93!

when all else fails use reserves for the purpose they are meant

secondary market? whers the curve at the moment against where majority of banks got in? in which case ur darling KCB will take a major trading(bond) hit!

NB: A portion of KCB's deposits are directly linked to the growth of the National Budget. Money is now flowing out of Treasurey into the State Agencies who also have accounts with KCB. Just watch how a consolidated and leaner KCB Group does its thing.

When they began accomodating in mass earlier through the lender of last resort facility ... they should have known that once they opened that window wide ... any threat to it shutting down would only result in money mart rates being jacked up. They should know this and should remove the cbr peg or place a cap. And to the best of my knowledge liquidity is skewed and this is a problem that hasn't been solved. No t.bills have been discounted so far, which would have been the easiest option @ 3% above market. Instead many banks opt for more expensive alternatives; bond portfolios are in the red, pricing in the swaps market can't be easy to do and hrt volumes are almost zero (even though they're collateralised). What happens if ur a small bank with few lines of credit? It's the disharmony between fiscal/monetary policies that have created this problem. You'll find that fiscal policy will suffer as a result of the above move (let us see next week's auction). What we needed was the aggressive use of their signaling tool, the cbr.