Treasury reopens Sh30 billion bond as fiscal year ends

The Treasury has opened the sale on a Sh30 billion bond, the last issue for the fiscal year which comes at a time pressure on the government to borrow has reduced due to inflows from external concessional lenders.

The bond that is being sold by the Central Bank of Kenya until June 15 is reopening of a pair of 20-year papers first sold in 2019 and 2012, effectively giving them 17.9 years and 11.4 years to maturity respectively. They will carry a coupon of 12.87 percent for the 2019 paper and 12 percent for the 2012 issue.

June marks the second straight month in which the government is issuing a Sh30 billion bond, a lower quantum compared to the regular issuances of between Sh50 billion and Sh60 billion in previous months.

This is an indicator of a National Treasury that is not under pressure to take up large amounts from the domestic market, having entered the month on target for domestic for the fiscal year.

The government has so far borrowed a net of Sh496.3 billion domestically against a full year target of Sh543.9 billion, as per calculations done by NCBA #ticker:NCBA analysts.

“Evidence from the recent government debt auctions reveal slackened demand for local debt by the sovereign. The rate of bids acceptance has materially declined in recent sales following the lift to the government’s liquidity from the IMF facility as well as the debt restructuring exercise,” said the NCBA analysts in a fixed income note.

New lending

Later this week, the government will receive Sh80.9 billion ($750 million) in new lending from the World Bank, which should ease any liquidity concerns in the short term.

It is also set to get an additional Sh44.2 billion ($410 million) from the IMF in coming weeks, which is the second disbursement under the Sh259 billion ($2.4 billion) three-year financing programme agreed with the Bretton Woods institution in February.

Analysts at Genghis Capital also expect that tax revenue for June should be higher than the average in recent months, which should further ease the need to borrow heavily.