The Treasury has returned to the market with a tap sale on its January bond, looking to mop up the Sh12 billion it left on the table during the initial sale which closed last week.
The prospectus for the tap sale, published yesterday by the Central Bank of Kenya (CBK) shows that the government is seeking Sh15 billion from the offer, to add to the Sh25.02 billion it netted in the initial sale of the bond.
The issuance comprised a new three-year bond and a third reopening of a five-year bond first sold in July last year.
On the three-year option, investors offered the government Sh29.09 billion, asking for an average return of 18.63 percent. The CBK took up Sh22.07 billion, at an average rate of 18.39 percent.
On the reopened five-year paper, bids stood at Sh8.06 billion at an average asking rate of 19.07 percent as investors sought to test the monetary regulator’s resolve on keeping a lid on rates.
The CBK took up Sh2.9 billion from this paper, at an average of 18.77 percent.
The average rates of accepted bids will apply to the tap offer, which is on sale until tomorrow.
The CBK has in recent auctions taken to rejecting bids deemed to be expensive in initial bond sales, before returning to the market to mop up the funds via tap sales, where it has control over the yields.
It has made six tap sales since June last year, effectively issuing one for each bond it has floated.
The tap sale for the January bond is being issued in a period of enhanced liquidity in the market, owing to government payments to the education sector and heavy maturities of government debt in the month amounting to Sh199 billion.
Rejected bids
The CBK also rejected Sh12 billion worth of bids from last week’s Treasury bills sale, effectively leaving the bidders looking for alternatives to park their cash.
The CBK said that it received bids worth Sh57.97 billion in the sale, out of which it accepted Sh45.96 billion against a target of Sh24 billion.
Some of this liquidity is likely to filter through to the shorter dated bond offering, raising the prospects of the Treasury meeting its target in the tap sale.
