April’s bond consists of two tranches of three and 15-year paper, targeting Sh40 billion and Sh30 billion respectively.
The three-year paper is on sale until April 5, while the longer tranche runs until April 19.
The government has in the last two years concentrated on selling long-dated papers to lengthen the maturity profile of its domestic debt and avoid refinancing pressure.
The Treasury is seeking to raise Sh70 billion after opening the sale of its April bond that includes a three-year paper targeting banks whose holdings of government debt have fallen in recent weeks amid a dearth of their preferred short-term securities.
April’s bond consists of two tranches of three and 15-year paper, targeting Sh40 billion and Sh30 billion respectively. The funds are meant to go towards ordinary budget financing.
The three-year paper is on sale until April 5, while the longer tranche runs until April 19.
The government has in the last two years concentrated on selling long-dated papers to lengthen the maturity profile of its domestic debt and avoid refinancing pressure.
This has hit banks, which for liquidity purposes, tend to prefer short-dated papers. On the other hand, pension funds have benefited from having a steady supply of long-term bonds, which fit into their long investment horizon.
Banks have, thus, seen their share of government debt fall to 49.2 percent from 54.4 percent in March 2020, while that held by pension funds has gone up from 29 percent to 31.9 percent in the period.
The two sectors are the largest lenders to government domestically, ahead of insurance firms, parastatals, and retail investors.
Lenders are, therefore, expected to provide the bulk of demand for the short-dated paper, boosting its potential for oversubscription. Yields on both papers will be market-determined, setting the stage for another face-off between the Central Bank of Kenya (CBK) and investors over rates.
The last bond sale earlier this month, however, indicated that the CBK is unwilling to budge on rejection of expensive bids, should investors demand to be paid higher amid concerns over inflation and a depreciating shilling.
