The Treasury has opened a tap sale on the two-year and the re-opened 10-year bonds seeking an additional Sh13 billion.
The Central Bank of Kenya (CBK) in a statement on Tuesday said the two-year bond will have an average yield rate and coupon of 11.619 per cent, while the re-opened 10-year bond will have a coupon of 12.966 per cent and an average yield rate of 13.072 per cent.
The sale commenced on Tuesday and is expected to close on Thursday or upon attainment of the target.
“Bids shall be priced at the weighted average rate of the accepted bids for the bonds auction value dated September 25, 2017 and adjusted for accrued interest,” said CBK.
During last week’s auction, the bonds auction received a 147.7 per cent subscription rate, with the market average rates for the bids coming in at 11.8 per cent and 13.2 per cent, slightly above the accepted rates of 11.6 per cent and 13.1 per cent for the two-year and re-opened 10-year bonds, respectively.
The bonds had received bids worth Sh44.3 billion against a target of Sh30 billion, and market analysts had predicted a tap sale on the two-year bond as the Treasury sought to mop up the Sh14 billion it had left on the table.
The two-year bond had attracted bids worth Sh34.4 billion, with the Treasury accepting Sh20.6 billion. The re-opened 10-year bond received bids worth Sh9.9 billion, with the government accepting Sh6.2 billion.
Just as was the case with other previous bond auctions held this year, in which the Treasury only accepted 71.3 per cent of total bids on average, the government did not accept expensive bids, taking up only Sh27 billion out of the Sh44.3 billion worth of bids received translating to an acceptance rate of 60.9 per cent.
“We expect the government to continue rejecting expensive bids on government securities while maintaining interest rates low to prevent further crowding out of the private sector by banks as they channel more funds towards government securities,” said Cytonn Investments in a weekly market research note.
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