The Treasury took up an extra Sh19.9 billion above the target of Sh60 billion in the first bond sale of the new fiscal year, taking advantage of high investor appetite for the offer that was sold amid ample liquidity in the market.
Bond results published by the Central Bank of Kenya (CBK) show that investors bid a total of Sh116.92 billion on the three tranche bond, which consisted two re-opened 15-year papers first sold in 2012 and 2018 and a 25-year paper.
The Treasury took up Sh79.9 billion, which represents 12.1 percent of the targeted net domestic borrowing of Sh658.5 billion for the fiscal year.
The sale that concluded on Wednesday coincided with high liquidity in the market, due to government payments—revealed in the aggressive mop-up activity by CBK through seven and 14-day tenor term auction deposits of Sh196.07 billion in the duration.
“The performance was quite spectacular and was majorly bolstered by the high liquidity during the duration of the bond sale,” said Churchill Ogutu, head of research at Genghis Capital.
“The high subscription levels in latest Treasury bills auctions also highlight the enhanced liquidity levels.”
Analysts at Sterling Capital also attributed the oversubscription to relatively attractive coupon rates on offer in the sale under a low interest rate environment.
The reopened 15-year bond that was initially sold in 2012 is paying a coupon of 11 percent, while the 15-year one carries a coupon of 12.65 percent.
The 25-year paper will return 13.92 percent, which is on the higher end of the yield curve.
The rush for these papers is also indicative of market expectations that rates are unlikely to go up in the short-term due to the high liquidity levels, and the fact that the government is flush with cash having recently taken up a large amount in external loans.
These loans consist Sh108 billion ($1 billion) in Eurobond proceeds, a Sh81 billion ($750 million) World Bank loan and Sh44 billion ($407 million) from the IMF.