Capital Markets

Reopened April bonds miss target for second time


The Central bank of Kenya, Nairobi. FILE PHOTO | NMG

The government has raised Sh19.59 billion from the reopened sale of two April bonds — the three and the 15-year papers — after the securities underperformed in the first auction.

The Central Bank of Kenya was in the market to raise Sh25 billion from the resale of the securities but fell short by Sh5.4 billion. The tap sale attracted bids worth Sh19.6 billion but the CBK accepted bids worth Sh19.59, rejecting Sh10 million.

The latest sale targeted investors who were willing to take interest rates set in the first auction. The three-year paper has a coupon of 11.766 percent while that on the 15-year security stands at 13.942 percent.

More investors placed bids on the longer-dated paper worth Sh15.98 billion with the CBK taking up Sh15.97 billion.

The three-year bond received bids worth Sh3.62 billion with the fiscal agent accepting Sh3.61 billion.

The papers initially sought to raise a total of Sh70 billion in the April auction but ended up taking in Sh60.77 billion.

The CBK was seeking more than double the first auction’s shortfall of Sh9.23 billion from the resale of these bonds whose underperformance was attributed to investors bidding higher interest rates than the fiscal agent was willing to pay.

The sale was to close upon attainment of the Sh25 billion target or on June 23, whichever came first.

The CBK kept the auction open until the last day, indicating the muted demand for the securities.

Major investors in treasuries have been pushing for higher rates amid rising cost of living, uncertainties of an upcoming election and the weakening of the shilling against major world currencies.

Inflation rose to 7.1 percent in May, marking a 27-month high on a rise of a wide range of essential commodities.

The local currency has meanwhile depreciated 8.1 percent against the dollar over the past 12 months in what has been attributed to strong demand for the hard currency.

Institutional investors led by banks, pension funds, and insurers usually state the interest they want to be paid, while most small investors typically settle for the market average.

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