Liquid investors splash Sh81 billion in September bond sale

Investors bid Sh81.68 billion for the three-tenor Treasury bond whose sale concluded on Tuesday, with the government taking up Sh64.2 billion from the offer that targeted Sh50 billion.

A liquid money market supported the Treasury’s efforts to raise the new debt, whose proceeds are earmarked for general budgetary expenditure. The funds took the State’s net uptake from bond sales to Sh264 billion in the current fiscal year.

The issue consisted of reopenings of a 15-year bond first sold in 2010, another 15-year paper whose initial sale was in February this year and a 20-year bond sold in 2011. The bonds therefore have 5.3, 14.5 and 10.7 years to maturity, respectively.

Investors were most attracted to the 2020 15-year paper, which carried the highest coupon, offering Sh49.8 billion on it compared to Sh17.8 billion on the 2010 15-year and Sh14 billion on the 2011 20-year papers.

“Overall, the performance was buoyed by the liquid environment. In particular, the market picked the cue that was marked from July's primary bond coupled with the relatively higher coupon rate offered, thus exaggerated bidding on the longer paper on offer was a no-brainer,” said Genghis Capital head of research Churchill Ogutu.

The weighted average rate on accepted bids on the three papers stood at 10.46 percent for the 2010 15-year, 12.54 percent for the 2020 15-year and 11.87 percent for the 2011 20-year paper.

The issuance of the three signalled a continuation of the government's preference of longer-dated issues in line with the medium term debt management strategy to lengthen maturity profile of domestic debt.