Nairobi, June 8 -- Fixed-income investors are scrambling for Treasury bills and cutting their appetite for Treasury bonds, hoping returns on government paper will increase and force the state to rely on short-term borrowing.

Three of the last four Treasury bill auctions have been oversubscribed. In contrast, bond auctions in May and June underperformed, reflecting the switch to shorter government paper as investors bet on the rates increasing.

Investors often avoid locking funds in long-dated papers such as bonds if they expect interest rates to rise, favouring the 91-day Treasury bill instead.

The shift comes ahead of the Central Bank of Kenya (CBK) policy meeting on Tuesday, which is expected to signal the general trend of interest r...