Capital Markets

Investors offer Sh56 billion in November Treasury bond sale

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Central Bank of Kenya (CBK). FILE PHOTO | NMG

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Summary

  • Central Bank of Kenya (CBK) had targeted Sh40 billion on the two bonds for budgetary support.
  • The government has been issuing the multiple tenor and longer-dated papers, meaning long maturity period, to reduce refinancing risk.

Investors offered Sh55.98 billion for two bonds the Treasury re-opened for sale this month, way above the target, despite jitters about declining liquidity in the market.

The high subscription on the reopened 15-year and 20-year bonds represented a performance rate of 139.95 per cent and indicates the sustained investor preference for the long-term debt due to higher yields.

The two bonds, whose sale closed on Tuesday, had a coupon rate of 12 per cent and 13.2 per cent respectively.

The Central Bank of Kenya (CBK) had targeted Sh40 billion on the two bonds for budgetary support. The results show the government took Sh53.72 billion.

Analysts had projected relatively lower bids for the bonds owing to the tightening liquidity in the market even as pension funds and insurers’ uptake levels dropped on declined surplus cash.

“CBK has managed to get Sh15 billion more than the target still on the same trajectory of tightening liquidity,” AIB-AXYS Africa debts and equity senior associate Kenneth Minjire said.

The government has been issuing the multiple tenor and longer-dated papers, meaning long maturity period, to reduce refinancing risk.

In the past months, the auctions had received heavy bidding over supported liquidity and investors preference to the long-term debt securities due to higher returns and limited alternative investment avenues with low risks. Mr Minjire, however, maintains that the government should place short-term papers to pull up heavy investor bidding that has since dropped.

This month’s sale followed a tap sale for 25-year Treasury bond first sold in 2018, attracting bids worth Sh7.96 billion out of Sh20 billion target.