Treasury’s three-year bond raises Sh20.3bn


The National Treasury building in Nairobi in this picture taken on March 15, 2023. PHOTO | DENNIS ONSONGO | NMG

The National Treasury has seen its first fully subscribed bond on the first auction for the year outside the tax-free infrastructure bond.

This is after investors put in bids of Sh20.74 billion, surpassing the Sh20 billion amount on offer to mark a 103.72 percent performance rate for the three-year paper.

The Central Bank of Kenya, the exchequer’s fiscal agent has accepted Sh20.29 billion from the investor bids at a weighted average rate of 14.228 percent.

The performance of the issue has come against a wide consensus of the paper’s under subscription based on tight liquidity, reduced foreign player participation in the local market and reduced participation by banking sector players in bond auctions.

Mark-to-market losses and better returns from lending have seen commercial banks slow down bids for government securities.

Analysts had nevertheless projected aggressive bidding from investors as they raised their bias towards higher-risk-adjusted returns in the face of elevated inflation and volatility in the interest rates environment.

“From the performance of the recent bond and Treasury bills issues, investors’ bidding trends have shown a risk versus duration mismatch. The recent two-year paper (FXD1/2022/03, came in at the 13.47 percent level and we also expect investors to bid higher in this issue,” analysts at AIB-AXYS Africa had indicated in a primary bond auction note.

The bond’s improved performance is a shot in the arm for the government after the under subscription of most other Treasury bond issues in the 2022/23 financial year.

The abstinence from the investors saw the truncating of the domestic borrowing target for the year to June from Sh582.2 billion to Sh428.3 billion in the first supplementary budget.

The exchequer is expected to channel Sh12.05 billion towards new borrowing while the balance of Sh8.25 billion is to be wired towards redemptions.

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