Treasury seeks Sh40 billion in December bond sale

The Treasury is seeking to raise Sh40 billion in December bond sale, a lower amount than the previous months’ targets amid improving tax collection as Kenya continues to recover from the Covid-19 related economic slowdown.

The Central Bank of Kenya (CBK)— the government’s fiscal agent — said in a prospectus that the bond will be offered in two tranches, consisting of reopened 10 and 20-year papers first sold in 2019 and 2018 respectively.

The bonds carry coupon rates of 12.28 percent and 13.2 percent respectively.

The bond whose sale opened Monday is on the market until December 7.

In previous bond sales in the current fiscal year, the Treasury has been targeting between Sh50 billion and Sh75 billion, with heavy oversubscriptions in the sales pushing it ahead of its domestic borrowing target for the year.

The State has revised downwards its domestic borrowing target for the current fiscal year to Sh616.8 billion as per the draft Budget Policy Statement for 2022/23 that was released last week, with Sh412.5 billion expected to come from external loans as it looks to fill the Sh1.029 trillion budget deficit.

At the same time, the Kenya Revenue Authority (KRA) beat its tax collection target for the first four months of the fiscal year by Sh27.1 billion, netting Sh631 billion against a target of Sh603.99 billion.

Local debt

“Based on the revised projections, the government has thus far borrowed about 51 percent (Sh313 billion) of its local debt target for the year. This could slow down appetite in the latter half of the fiscal cycle,” said analysts at NCBA in a fixed income report.

Analysts expect that the performance of the December bond could be supported by the liquid money market, which has been supported by government payments to its agencies and departments.

In the November bond sale that targeted Sh50 billion, the government raised Sh69.5 billion, having received Sh84.2 billion worth of bids from investors.