Capital Markets

Investors earn handsome rate on oversubscribed 10-year Treasury bond

nt

The Treasury building in Nairobi. PHOTO | FILE

Summary

  • At 15.039 per cent, the yield is higher than that of other bonds currently listed on the Nairobi Securities Exchange.
  • The highest yield is 14.9 per cent of the 30-year bond that is the longest tenor in the market.

The latest 10-year Treasury bond offer of Sh25 billion has been slightly oversubscribed and gives investors a generous yield of 15.039 per cent.

The yield is higher than that of other bonds currently listed on the Nairobi Securities Exchange (NSE). The highest yield is 14.9 per cent of the 30-year bond that is the longest tenor in the market.

The new yield is also the coupon (interest) rate paid to investors. In some of the previous auctions, the Treasury has given a pre-determined coupon rate.

“The total number of bids received amount[ed] to Sh26.31 billion. The weighted average rate for successful bids was 15.039 per cent,” said the Central Bank of Kenya (CBK) in a notice.

The Treasury accepted Sh18.3 billion, rather than the advertised Sh25 billion, in a bid to ensure that the cost of the funds for the government was not too high.

Had the Treasury accepted all bids it would have had to repay investors 15.267 per cent as coupon rate. For the 182- and 364-day T-bill, the Treasury offered Sh12 billion but received bids totaling Sh13.8 billion.

The yield on the two tenors of securities were however higher with the six-month paper at 11.182 per cent compared to the previous 11.020 per cent while the one-year gilt was at 11.982 per cent up from 11.865 per cent in the previous week.

The 91-day Treasury bills market however realised only Sh1.68 billion in bids against the advertised Sh4 billion. The yield came slightly lower at 8.607 per cent against 8.609 per cent in the previous auction.