Capital Markets

Treasury eyes Sh60bn from Oct bond sale

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

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Summary

  • The Treasury has opened the sale of a Sh60 billion bond for October, hoping to capitalise on improved liquidity in the domestic market.
  • A prospectus issued by the Central Bank of Kenya (CBK) shows that the bond will be offered in three tranches, covering maturities of between six and 25 years.

The Treasury has opened the sale of a Sh60 billion bond for October, hoping to capitalise on improved liquidity in the domestic market.

A prospectus issued by the Central Bank of Kenya (CBK) shows that the bond will be offered in three tranches, covering maturities of between six and 25 years.

The reopened three past bonds for the October issue, consisting of two 15-year papers first sold in 2013 and 2019 and which have 6.4 years and 12.9 years to maturity respectively.

The third tranche is a reopening of the 25-year bond that was first sold in July this year, which now has 24.7 years remaining to maturity. The July bond attracted bids worth Sh39.9 billion when it was initially sold.

The outlook for the October bond however depends on the liquidity situation in the next two weeks.

The excess liquidity that had backed the heavy bidding seen on recent bond sales has tightened following the huge mop-up that came via the September infrastructure bond, which raised Sh106 billion, and continued open market operations by the Central Bank of Kenya (CBK).

“This week, the liquidity situation will be softened by bond maturities and coupon payments estimated at Sh47.96 billion. However, some tax settlements in the week and early cycle balance build-up could somewhat offset the positive cash disposition, delaying the return to the Pre-IFB equilibrium,” said NCBA in a fixed income report earlier this week.

The big spread of maturity among the three tranches of the bond could however help push up demand by catering for a wider variety of investors—from banks that prefer short-dated paper to pension funds that go for long-term bonds.

The Treasury has already borrowed a net of Sh278 billion from the domestic market, representing 42 percent of the target of Sh658.8 billion for the fiscal year ending June 2022.

The new bond, which is on sale until October 5, is therefore likely to raise net borrowing past 50 percent of the target well before the halfway mark of the year (December) if its performance mirrors that of recent issuances.