The National Treasury had added Sh30.5 billion to its haul from three re-opened bonds this month, taking its total nettings from the auctions to Sh56.1 billion.
The sale of a re-opened 10-year bond which closed on Wednesday, fetched Sh30.5 billion against a target of Sh20 billion with investor bids at Sh55.5 billion, representing a 277.88 percent performance rate.
Investors in the paper first issued in February this year, paid a premium price of Sh103.0905 to the par value of Sh100 to lock in the 16-percent coupon on offer, an indication of high demand for the bond.
The weighted average rate of accepted bids was at 15.8553 percent, falling below the paper’s coupon. Bond prices have an inverse relationship to yields where higher prices contrast to a lower yield on a security.
“The issue’s subscription rate shows a resolve by investors to lengthen their bond duration, in a bid to lock in current high yields given that interest rates are on a declining trend,” noted analysts at Sterling Capital in a fixed income note.
The government raised Sh25.7 billion earlier from a re-opened 10-year and 15-year bond against a target of Sh25 billion from bids of Sh33 billion.
The two re-opened bonds which were first issued in February 2023 and April 2022 respectively, were sold at a discount of Sh95.2760 and Sh88.3760 respectively to the par value.
The weighted average rate of accepted bids was higher than the papers' coupon at 15.9724 percent and 16.2986 percent, in contrast to coupons of 14.1510 and 13.9420 percent respectively.
The rate of return earned by investors does not match the coupon since the Central Bank of Kenya offers a discount or premium when reopening a security in an environment where rates are rising or falling.
The low rate of acceptance by the CBK on all three re-opened bond auctions is representative of the bank’s taming of aggressive bidding to lower borrowing costs for the government even as the exchequer faces high budget requirements.
Investors have marked a mild switch to long-term bonds with an eye to lock in high yields as domestic interest rates continue to fall.
Bids on Treasury bills have however consistently exceeded subscriptions on bonds in recent weeks revealing investor jitters on risks to increased fiscal deficits by the government.
