Treasury back to market with a Sh20 billion bond


The National Treasury building in Nairobi in this picture taken on March 15, 2023. PHOTO | DENNIS ONSONGO | NMG

The Treasury has returned to the domestic debt market with a three-year bond seeking Sh20 billion, hoping to attract investors who have been reluctant to commit long-term funds to the government amid uncertainty over interest rates.

The interest rate for the new bond will be determined by the market, the Central Bank of Kenya (CBK) announced on Thursday in the paper’s prospectus.

The rate on accepted bids will therefore be closely watched by investors, who are keen to see if the funding pressure currently facing the Treasury will push the CBK to relax its stance against expensive bids in bond auctions.

The most recent sale—of a Sh30 billion reopening of a 15-year bond first sold in 2019 and a three-year paper first sold last year—raised just Sh1.76 billion, all on the three-year paper after the cancellation of the longer tenor.

Analysts said despite the market seeing tight liquidity, the likeliest reason for the bond cancellation was aggressive investor bids which were viewed to be untenable by the government, rather than a lack of interest to lend by investors.

The three-year bond received bids worth Sh7.3 billion, out of which the CBK took up Sh1.76 billion.

In the new bond, whose sale runs until May 9, the Treasury will be hoping for improved performance but may have to offer investors higher returns if this is to happen.

The three-year tranche in the April bond issue saw investors demanding on average 13.89 percent in interest, versus a printed coupon of 11.77 percent, with the average yield of accepted bids settling at 13.47 percent.

These rates will have served as a guide to the CBK and the Treasury of the kind of returns demanded by investors to lend to the government for three years.

In the last few bond issuances, the CBK has been failing to hit the borrowing target due to what analysts have said is an interest rate issue, and has instead opted to park funds in the 91-day Treasury bill as they wait out the uncertainty.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.