Sanlam Investments East Africa Limited

Fund Fact Sheet Commentary – 31st July 2022

The Money Market Fund maintained a gross yield of 0.9% in July 2022 and 11.3% over twelve months. High-yielding deposits supported by the elevated interest rate environment continue to support the yield of the fund. Bond yields edged up by an average of 17 basis points (bps) across the yield curve in the month of July.

The Central Bank of Kenya issued a tap-sale of 18-year infrastructure bond and re-opened a 5-year bond and 11-year bond at weighted average yields of 13.7%, 13.2%, and 13.9% respectively. The Central Bank of Kenya Monetary Policy Committee retained the key policy rate at 7.5% in the July meeting stating that the rate hike in May (50bps) was timely in anticipating inflationary pressures, and its impact was still transmitting through the economy. 

The Kenya Shilling weakened by 0.8% against the US Dollar to close at Kshs.118.7 in July 2022 amid tighter global monetary environment. Central Banks in major economies have hiked rates in a bid to control elevated inflation. Locally, this has continued to deteriorate the dollar demand and supply mismatch despite importer demand normalizing in H2 2022. We expect further currency depreciation on account of higher global commodity prices coupled with the general rise in interest rates in developed economies. 

Kenya’s inflation rose to 8.3% year-on-year (y/y) in July 2022 from 7.9% y/y in June 2022. This was mainly due to higher food and non-alcoholic beverages inflation which was up 15.3% in July against 13.8% in June 2022. Going forward, the fund will seek to invest contributions and fund maturities in higher-yielding assets given the rise in interest rates.

Related articles: