mechanism through which financial claims can be transferred from one holder to another, a secondary market provides wide possibilities for issuers of long term securities to match their cash flows in a stable and cost effective manner. investors with their diverse liquidity needs are assured that they can convert their investments into cash at any time and at a fair market price. at the same time, issuers are assured that their financing needs, especially the long term ones, will be met in an orderly and timely way. by providing such an assurance, a secondary market ensures that savings are pooled and invested in the economy in a cost efficient manner. in this respect, a vibrant secondary market is therefore an important aspect of the price discovery process. chairperson, an active secondary market is important to central banks as it facilitates the efficient conduct of monetary policy. this is because, to effectively implement monetary policy, central banks depend largely on the ability to influence financial markets. therefore, with a vibrant secondary market, monetary policy effects are transmitted to the rest of the economy in a more transparent manner, which in itself contributes to price stability. at this point in time, it is opportune for me to outline briefly the efforts government has made towards developing our secondary markets. since the early 1990s, the government has taken steps to develop the securities market. there has been good progress made on the developing the primary market, though further refinements can be made to the structure. as for the secondary market, it has barely evolved beyond the elementary levels. let me quickly go over some of the most important changes to the primary market : • following the liberalization of interest rates in 1992 the auction system for treasury bills was introduced to create a more transparent and market - based system of price determination that would encourage broader investor participation. • alongside the introduction of the auction system, the maturity structure was extended from the only existing term of 91 days to include 28 and 182 days in order to meet the various liquidity needs of investors. • in 1995, government bonds with a maturity term of 12 month and 18 months were added to the list of securities. • following the increased depth of the market, the structure of government securities was streamlined with the termination of the 28 day treasury bill issuance and the subsequent introduction of the 273 days maturity term. • in 2005, reforms of the government securities market continued with the cessation of the 12 months and 18 months government bonds. in their place, a 364 day treasury bill was introduced alongside the 3 and 5

government bonds rose marginally by 10 basis points to 11. 3 %. 12. the stock of government securities outstanding increased by 5. 6 % to k9, 940. 9 billion at the end of the fourth quarter from k9, 411. 2 billion in the third quarter. this was mainly accounted for by an increase of 13 % in the amount of treasury bills outstanding against a modest growth of 0. 2 % recorded for government bonds. despite this, government bonds accounted for the largest proportion of the outstanding total stock of marketable securities, contributing k5, 439. 4 billion ( 54. 7 % ) to the entire portfolio. total treasury bills in circulation amounted to k4, 501. 5 billion, representing 45. 3 % of the total marketable securities outstanding. 13. investment in treasury bills held by non - residents increased to k497. 0 billion from k8. 8 billion in the third quarter. the increase reflected renewed confidence in short - term government paper. conversely, foreign investment in government bonds decreased to k127. 9 billion from k150. 5 billion recorded in the third quarter, due to net maturities. collectively, total holdings of government securities by non - resident was k625. 4 billion, representing 7 % of total securities outstanding. 14. developments in commercial banks ’ nominal interest rates continued to be mixed during the reviewed quarter, with the weighted average lending base rate ( walbr ) trending downwards to 19. 4 % from 19. 8 % in september 2010. similarly, the average lending rate ( alr ) fell to 26. 4 % in december 2010 from 26. 8 % in september 2010. however, the 30 - day deposit rate for amounts exceeding k20 million and the average savings rate ( asr ) for amounts above k100, 000 remained unchanged at 5. 6 % and 4. 7 %, respectively. real sector 15. developments in the real sector were satisfactory during the reviewed quarter. this was reflected by higher output of most monitored commodities, and an increase in investment pledges. figures in square brackets are for september 2010. bis central bankers ’ speeches food reserve agency stocks 16. the food reserve agency ( fra ) had 982, 784 metric tonnes ( mt ) of maize in stock at end - december 2010, up from 162, 956 mt at end - september 2010, out of which, total purchases from the marketing season amounted to 883, 036 mt. the agency also had