Capital Markets

Treasury raises Sh20.9 billion in oversubscribed May bond tap sale

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • The tap sale on this month’s Treasury bond issue was oversubscribed by 4.7 per cent with the government attaining its target, supported by higher market liquidity.
  • Investors offered Sh20.93 billion, slightly above the targeted Sh20 billion, with the Central Bank of Kenya (CBK) taking up Sh20.69 billion.
  • The Treasury rolled out the tap sale to cover the deficit on the two bonds issued earlier in the month, which raised Sh20.29 billion out of a targeted Sh30 billion.

The tap sale on this month’s Treasury bond issue was oversubscribed by 4.7 per cent with the government attaining its target, supported by higher market liquidity.

Investors offered Sh20.93 billion, slightly above the targeted Sh20 billion, with the Central Bank of Kenya (CBK) taking up Sh20.69 billion.

The Treasury rolled out the tap sale to cover the deficit on the two bonds issued earlier in the month, which raised Sh20.29 billion out of a targeted Sh30 billion.

Investors offered Sh42.59 billion for the two Treasury bonds in this month’s auction, marking a marginal over-subscription.

The government had placed on the auction reopened 15-year and new 25-year bonds which recorded subscription of up to Sh42.59 billion - at Sh11.58 billion and Sh31 billion, respectively.

Despite the high bids, the CBK rejected bids which they deemed aggressive, taking up only Sh20.29 billion.

The 15-year reopened bonds attracted higher bids at Sh15.89 billion compared to Sh5.03 billion on the 25-year paper, reversing the trend in the initial sale where the longer tenor bond was preferred.

The tap sale will apply the same coupon rates as the month’s initial sale at 12.734 per cent and 13.924 per cent respectively.

Analysts at Sterling Capital attributed the full subscription of 104.5 per cent to the small issue size and high market liquidity.

“The tap sale was fully subscribed on account of high market liquidity and relatively small size of the offer,” they said in the tap –sale results update.

Liquidity has improved in recent weeks with the interbank rate declining to 4.65 per cent on May 12 from 6.5 per cent as at the beginning of the year.