During the paper's earlier sale this month, investor bids were lower at Sh29.46 billion an outcome largely attributable to investors' preference for the reopened 6.5-year infrastructure bond, which posed lower duration risks.
The CBK accepted Sh14.53 billion from the paper’s earlier sale while taking Sh74.1 billion from the shorter-dated infrastructure bond.
Combined, the primary auction of the reopened bonds was more than twice subscribed at Sh126.3 billion against a target of Sh50 billion to keep up with the performance of previous infrastructure bond auctions.
The large haul from the infrastructure bond auctions serves to ease government funding concerns amid headwinds, including recent credit ratings downgrades by global credit ratings agencies Moody’s and S&P Global.
The performance of the twin infrastructure bond sale further bolsters the government’s domestic financing plan for the 2024-25 financial year.
New borrowing from the auctions totals nearly one-third of the Sh413 billion net domestic borrowing target for the period.
The CBK brought the longer-dated 17-year bond in the secondary sale in its quest to drive uptake of long-term bonds even as it pushes to cool interest rates on government securities.
Interest rates on treasuries remain elevated but are expected to ease off in the near term on rate cuts by the CBK and the reduced appetite for credit by the government from the domestic market.
Investors in the two reopened infrastructure bonds, for instance, locked in returns of 18.2989 percent for the 6.5-year paper and 17.7279 percent for the 17-year paper, respectively. This compares to yields of 14.399 percent and 17.9327 percent, respectively when the bonds were first issued last year.
