Infrastructure bonds have typically attracted strong subscriptions due to their tax-free status and the high rates that they are sold at.
The bond is on auction until March 7. It is being offered alongside the tap sale of two February bonds through which CBK is separately seeking to raise an additional Sh10 billion after failing to hit its target in the earlier auction of the securities.
The CBK had sought to raise Sh50 billion from the bonds — a new 10-year paper and another 10-year security first sold in 2017 — but only collected Sh16.7 billion.
The bids for the bonds were also lower than the target amount, with investors placing Sh19.5 billion.
The tap sale opened on Tuesday and will be on a first come first served basis, with the offer closing on Friday or earlier once the target amount is raised.
Apathy for medium to long-term bonds seen recently has been attributed to investors’ greater preference for short-term securities whose rates have also been rising.
Interest rates on the 182-day and 364-day T-bills have increased to top the 10 percent mark. Returns on the 91-day paper are meanwhile edging closer to double digits and stood at 9.601 percent in last week’s auction, rising by 0.020 percent from the previous week.
Analysts say there are expectations that interest rates on bonds will rise further, leading to the wait-and-see stance.
“As per expectations, the (primary) issue was undersubscribed. Thus we attribute investor capital allocation to short-term debt securities, particularly the 91-day T-bill giving expectations of rising interest rates,” said analysts at Sterling Capital in reference to the outcome of the recent auction of the 10-year bonds.
