The successful presidential transition and improving liquidity in the market are likely to help the performance of the government’s domestic borrowing plans going forward, analysts say, pointing to the expected clarity on the new administration's fiscal plans.
The Treasury has been struggling to hit its targets in bond issuances in the current financial year, blamed on investor uncertainty over the elections and higher rate demands by investors in a high inflation environment.
Analysts at city-based investment bank AIB AXYS Africa, say the easing of uncertainty is set to help the performance of the September Treasury bond issuance, which is looking to raise Sh50 billion and whose sale closes today.
In the first two months of the fiscal year (July and August), the government issued three bonds seeking a total ofSh110 billion, but only managed to raise Sh54.2 billion.
Analysts had earlier anticipated an under subscription in the September sale, which kicked off before hearing of the presidential petition that resulted in the confirmation of Dr William Ruto as the fifth President of Kenya.
“We expect an oversubscription largely on account of improved liquidity in the money markets coupled with the passing of the cloud of uncertainty following the conclusion of the election petitions and subsequent swearing-in. Additionally, improved liquidity in the last few weeks, as observed in two weeks of T-Bill oversubscription, is likely to drive higher subscription rates,” said AIB AXYS Africa in a pre-auction note.
“We expect the slowed uptake by banks to be substituted with a renewed interest from international investors who we also suspect have been staying away from the local primary market on election-related risks.”
The below-par performance of the government’s domestic borrowing programme has been a concern, considering the ongoing difficulties in accessing external loans due to high rate demands by lenders.