Capital Markets

CBK seeks Sh15 billion from September bonds tap sale


The Central Bank of Kenya, Nairobi. FILE PHOTO | DENNIS ONSONGO | NMG

The Central Bank of Kenya (CBK) is seeking a further Sh15 billion from the tap (reopened) sale of two September bonds.

The government’s fiscal agent has offered the re-opened two and 10-year papers whose tenors sit at 1.9 and 2.9 years respectively to investors in the offer that runs until Thursday or upon the attainment of the target.

The papers offer an average yield of 17.4537 and 17.9266 percent respectively with the returns having been locked in during the papers’ reopening earlier this month.

Read: Investors incur higher costs on bonds platform

The offer saw the CBK accept Sh21.6 billion from Sh34 billion investor bids, having sought to raise Sh35 billion.

CBK’s lower acceptance was seen as an attempt to control yields on government paper by rejecting aggressive/expensive investor bids.

The apex bank will be seeking to mop up the nearly Sh12.5 billion left on the table while tying up investors to the realised average yields.

“We attribute the low acceptance rate to the government’s effort to control further yield increase with a tap sale expected,” analysts at AIB-AYS Africa observed in an earlier note.

The CBK has been battling to check interest rates on government paper amid large expectations of higher rates.

Investor expectations of higher interest rates have resulted in the inversion of the yield curve after the subdued demand for medium and long-term securities while interest rates on short-term debt/T-Bills have shot up as investors seek to only lock in short tenure securities with the expectation of high interest rates.

Read: Bond trading declines as holders avoid losses

As a result, the CBK has continued to issue short-term debt, including the reopening of issued bonds which are near maturity.

[email protected]