Yields on Kenyan and Nigerian debt are set to fall further as investor appetite remains strong, while rates in Uganda are expected to stabilise in the weeks ahead.

Strong foreign investor appetite for Kenyan debt and falling inflation are expected to push down the yields on a 1-year Treasury bond in next week’s sale.

The central bank will auction a 1-year bond worth 10 billion shillings on March 26, with traders expecting heavy subscription and lower yields on the paper.

It will also auction 91-day and 182-day Treasury bills worth a total of 7 billion shillings ($85 million).

“It appears the bidders are continuing to undercut each other in the market, chasing yields lower at a faster rate,” said Alex Muiruri, an analyst at Africa Alliance Investment Bank.

At this week’s auction, the weighted average yield on the 364-day bills fell to 17.04 percent from 20.96 percent in February, while the yield on the 182-day paper eased to 18.38 percent from 18.76 percent previously.

The yield on the 91-day paper came in at 17.98 percent, down from 18.75 percent last week.

Policymakers held the central bank rate at 18 percent for the third successive month in March, despite inflation falling to a lower-than-expected 16.7 percent in February from 18.3 percent in January, citing a still-precarious balance of payments position.

However, analysts said yields on government securities would keep falling in step with the falls in inflation.

“Everybody understands that inflation is coming down and it will come down even more significantly so Treasury bill yields will continue to decline despite the monetary stance,” said Phumelele Mbiyo, regional head of macroeconomic research at CFC Stanbic.Growing demand for Nigerian debt from local and offshore investors should ensure yields drop further in the week ahead, traders said, according to Reuters report.

The central bank sold 150.09 billion naira ($954 million) worth of Treasury bills at an auction this week.

The 91-day bill attracted a 14.18 percent marginal rate, down from 14.80 percent at the previous auction. The 182-day and 364-day bills were sold at marginal rates of 15.48 percent and 15.57 percent respectively, compared with 15.50 percent and 15.55 at the last auction.

“Yields were generally down this week because people exited their position prior to the treasury bill auction in case yields go up,” one dealer said.