The Central Bank of Kenya (CBK) said in a notice yesterday it had taken up just 17 per cent or Sh6 billion out of the Sh35 billion offered by investors.
The CBK took up a total of Sh20 billion from the Sh12 billion worth of 182-day and 364-day offers out of total bids of Sh25.8 billion.
Investors overwhelmingly opted for the six-month paper, putting up 327 bids totalling Sh24.75 billion, while the one-year attracted 89 bids worth Sh1.06 billion.
The Treasury has continued rejecting expensive money from the domestic debt market even with heavy maturities this month, taking up only Sh6 billion in the latest bond sale.
The Central Bank of Kenya (CBK) said in a notice yesterday it had taken up just 17 per cent or Sh6 billion out of the Sh35 billion offered by investors in this month’s 12-year infrastructure bond sale, in line with the caution by the governor Patrick Njoroge that offers priced higher than the prevailing yield curve will be rejected.
The government was in the market for Sh30 billion in the bond issue, whose sale came at a time when there is ample liquidity in the money market. Investors bid aggressively, asking for a weighted average rate of 14.05 per cent. The CBK was, however, contented to take up only a fraction of that at an average rate of 13.55 per cent.
Analysts said the Treasury had the option of taking up a small amount of bids at a lower rate, then issuing a tap sale which would automatically be priced at the accepted yield.
“Current infrastructure bonds in the market with similar tenors are trading between 13.3 per cent and 13.5 per cent.
However, should bidders be overly aggressive, they run the risk of the Treasury accepting a small amount and opening a tap-sale soon after which dictates the accepted bidding rate,” said NIC Securities in a note on the infrastructure bond.
This result means that the government has only raised the Sh6 billion from the two bond offers worth a total of Sh60 billion issued this year, having rejected all bids in January’s Sh30 billion 15-year re-opened issue. Investors were always likely to bid high in light of the heavy government securities maturities of Sh108 billion this month, coupled with the governments need to finance its gaping budget deficit.
The government is also behind on its domestic borrowing target as a result of the heavy maturities.
“The net domestic borrowing target for the fiscal year is projected at Sh236.1 billion. We believe in the first eight months of the year approximately Sh740 billion has been raised against maturities of Sh646 billion…resulting in a new borrowing of Sh93.9 billion indicating that the Treasury has raised 40 per cent of their budgeted target,” said Kestrel Capital in a debt market update.
Although the bond failed to realise the intended amount, the government was able to raise above target funds in Treasury bill sales this week.
The CBK took up a total of Sh20 billion from the Sh12 billion worth of 182-day and 364-day offers out of total bids of Sh25.8 billion.
Investors overwhelmingly opted for the six-month paper, putting up 327 bids totalling Sh24.75 billion, while the one-year attracted 89 bids worth Sh1.06 billion.
The rate on the six month paper remained flat at 10.52 per cent, while that of the 364-day paper fell slightly to 10.89 per cent from 10.93 per cent last week.
With the converged rates, investors opt for the shorter term paper because its risk weighted return is higher, especially when there is uncertainty over the interest rate environment.
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