The Central Bank of Kenya (CBK) is seeking Sh15 billion from the tap sale of a 10-year paper first issued in March as it stays on the quest of bringing down interest rates and extending the yield curve outwards.
Running to Thursday this week or upon the attainment of the targeted amount, it offers investors a return of 16.2273 percent.
The 10-year paper was first issued in March as the longest tenor security in more than a year as the CBK pushed for a return to longer-dated bonds.
The initial issuance had a coupon of 16 percent, signalling guidance on interest rates by the apex bank.
The CBK netted Sh4.8 billion from the first sale at a weighted average rate of 16.5189 percent after it rejected the expensive bids that had set the market-weighted average rate of return at a high of 17.7593 percent.
During the same month, the CBK mopped up Sh11.8 billion from tap sale. The paper was then reopened in April, eyeing a further Sh25 billion.
The CBK found success in the paper’s reopening as it drove down the weighted average rate of return to 16.2273 percent from 16.5189 percent previously while mobilising Sh10.9 billion.
At the same time, the market-weighted average rate of return investors targeted eased to 16.6681 percent from 17.7593 percent to signal the cooling down of interest rates in the government securities market.
Combined, the paper has so far raised Sh27.7 billion in three auctions that include a tap sale and a reopening. The 10-year paper has seemingly become the yardstick through which the CBK measures the success of its efforts to bring down interest rates in the domestic debt market.
Previously, CBK Governor Kamau Thugge had called the peak of domestic interest rates, pointing to changing investor sentiments following the elimination of perceived sovereign risks attached to the redemption of Kenya’s debut Eurobond.
Further, subsequent budget revisions to lower the quantum of domestic borrowing requirements for the financial year to the end of June and the 2024/25 fiscal year have further firmed up expectations of falling interest rates on government securities.
