Treasury goes back to highly liquid bonds market for Sh110bn

The Treasury has moved fast to mop up the Sh100 billion left on the table in this month’s bond sale by opening a tap sale on a 20-year paper first sold in 2018 targeting Sh40 billion, and a new Sh70 billion infrastructure bond.

The Central Bank of Kenya (CBK), which is the government’s fiscal agent, announced the new sales Tuesday with the tap sale on 20-year bond running until Tuesday, August 4 while the 11-year infrastructure bond will be on sale until August 18.

In the July bond sale which concluded last week, investors offered the government a record Sh181.8 billion, out of which the CBK took up Sh80.9 billion out of the funds offered, leaving Sh100 billion on the table.

It is these funds that the government is now targeting in the new sales announced Tuesday, pointing to efforts to frontload on domestic debt early in the fiscal year, taking advantage of the high liquidity in the market and relatively low interest rates.

The tax-free infrastructure bond carries a coupon rate of 10.9 per cent, while the tap sale rate will remain that of the accepted bids in the initial sale of the September 2018 bond, which stood at 12.93 percent.

Bonds are among the few investment classes offering a positive return currently in an economy that has been hard hit by Covid-19, hence the huge appetite for the papers by investors.

This has played into the hands of the government, which needs to raise Sh474 billion in net borrowing from the domestic market in the current fiscal year, as part of financing the budget deficit of Sh823.4 billion.