Kenya 91-day T-bill sale cut-off rate down to 1.8 pct

NAIROBI, July 1 (Reuters) - The cut-off interest rate on Kenya's 91-day Treasury bill slid to 1.801 percent at Thursday's auction from 2.628 percent at the previous sale, a much bigger drop than the market expected.

The Central Bank of Kenya said it received bids worth 9.242 billion Kenyan shillings ($113 million) for 4.0 billion shillings offered, a 231 percent subscription rate. It accepted 4.618 billion shillings.

A Reuters poll of fixed income traders had forecast the 91-day T-bill cut-off rate would come in at a median of 2.0 percent. [ID:nLDE65T0AN]

Treasury bill yields have been declining steadily since the start of the year, partly in response to a series of cuts in the central bank's benchmark lending rate since December 2008.

Some analysts have forecast that yields are likely to bottom out soon as real returns are pinched by inflation. [ID:nLDE65L241]

However, consumer prices were down 0.4 percent in June, led by a drop in food, transport and utility costs, which slowed year-on-year inflation to 3.2 percent from 3.9 percent in the previous month. [ID:nLDE6600Y1] (Reporting by Helen Nyambura-Mwaura; Editing by Toby Chopra)