Treasury issues Sh30 billion bond to support budget
The Treasury building in Nairobi. PHOTO | FILE
What you need to know:
The proceeds are earmarked for budgetary support, with the government still needing to plug a deficit of over Sh500 billion for the 2016/17 fiscal year.
The paper is offering a coupon rate of 13.5 per cent, which is similar to the average rate on offer for five year bonds in the past two years.
The government is in the market for Sh30 billion this month in a re-opened 15-year bond, which is being sold until January 24.
The bond’s initial sale was in 2007, meaning that it effectively has a five-year tenure since its maturity is in 2022.
The proceeds are earmarked for budgetary support, with the government still needing to plug a deficit of more than Sh500 billion for the 2016/17 fiscal year.
The paper is offering a coupon rate of 13.5 per cent, which is similar to the average rate on offer for five-year bonds in the past two years.
Tight liquidity
It is being sold at a time when liquidity in the market has tightened due to Central Bank mop-up in partial support of a volatile shilling.
The Treasury failed to raise the targeted funds in the past two bond issues in November and December, due to rejection of expensive bids and tight liquidity.
Last month, it took up just Sh10.5 billion at a rate of 12.5 per cent out of the Sh35.5 billion that investors offered during the sale of a two-year Sh30 billion bond.
In November, Treasury’s reopened 15 and 20-year Sh30 billion bond issues that received bids worth Sh22.9 billion from investors — with bids worth Sh22.2 billion accepted — at rates of 13.6 and 14.3 per cent respectively. This was attributed to tight liquidity.
