Capital Markets

Treasury eyes Sh50bn tap sale in bid to mop up excess liquidity


The Central Bank of Kenya offices in Nairobi. FILE PHOTO | NMG

The Treasury has opened a tap sale on the June bond in a move that will help Central Bank of Kenya (CBK) mop up excess liquidity that saw the initial sale heavily oversubscribed.

The government’s fiscal agent is targeting Sh50 billion from tap sale of the two re-opened 20-year Treasury bonds, which raised Sh19.7 billion from bids worth Sh64.9 billion. The bond was targeting Sh30 billion.

These papers were first sold in 2019 and 2012 with 17.9 years and 11.4 years to maturity respectively.

The high subscription was attributed to a liquid market, due to government payments to its agencies and departments as the end of the fiscal year draws near.

The tap sale is therefore expected to drain this excess liquidity.

“The market is awash with excess liquidity and the apex bank is striking while the iron is hot…the tap sale is an avenue of mopping up the excess liquidity,” said Churchill Ogutu, head of research at Genghis Capital.

The CBK has also been aggressive in liquidity mop up activities through Term Auction Deposits (TADs) that pulled in an aggregate of Sh102.9 billion in the past month.

The liquidity absorption activities tend to help strengthen the shilling. Mr Ogutu however said it has not been the primary intention of the government to use this month’s tap sale to support the currency, which will be boosted by higher foreign reserves from external flows expected this week.