The Central Bank of Kenya building in Nairobi. According to the latest CBK data, domestic debt stands at Sh1.311 trillion. PHOTO | FILE
What you need to know:
The issues, to be floated this month, are five-year and 20-year bonds.
Kenya is set to issue bonds totalling Sh20 billion this month, which is likely to raise yields and domestic debt level with low maturities expected in the month.
The two issues are the five- and 20-year bonds and seek to ride on success of previous issues.
“The January 2015 issues are both reopens of the FXD1/2014/5 and FXD1/2012/20 for up to Sh20 billion value-dated January 26, 2015,” said CBK in an email response to the Business Daily.
The initial five-year bond in April last year targeted Sh15 billion but brought in Sh17.5 billion at a rate of 10.8 per cent.
On the other hand, the 20-year Sh12 billion bond first issued in November 2012 brought in Sh30.7 billion through the initial sale and a reopening.
Last month, Central Bank of Kenya also offered 15-year and two-year bonds totalling Sh20 billion. It received bids amounting to Sh13.9 billion at 12.7 per cent for the 15-year bond and Sh13.11 billion at 10.9 per cent for the two-year bond.
The new bonds come as the Treasury cut its target for domestic borrowing on successful reopening of the Eurobond issue in a bid to cut interest rates charged by the commercial banks.
“There are no bond maturities lined up for January. Bearing this in mind, yields for primary bond auctions may edge up a notch as investors try to fetch the best yield possible in the current tight liquidity environment; hence we expect good subscription levels for the same,” said Genghis Capital fixed income analyst Vinita Kotedia.
Demand will also be determined by the level of repos redemptions at the time of issue.
Cumulative domestic debt
With the level of redemptions of securities slowing from November, the level of cumulative domestic debt has been edging upwards after remaining largely flat in the first four months of the 2014/15 financial year.
According to the latest CBK data, domestic debt stands at Sh1.311 trillion, having gone up by Sh57 billion since the beginning of October.
“On this upcoming bond, the market is likely to go more for the shorter five-year issue, with the dynamics of capital gains tax now coming into play,” said Commercial Bank of Africa senior dealer Joshua Anene.
The shorter-term Treasury bill issues have been registering mixed performance over the past two weeks, with investors particularly shunning the 91-day offer.
The Sh3 billion 91-day T-Bill offer for last week received bids amounting to Sh1.45 billion and the previous week’s offer attracted Sh770 million, both at 8.5 per cent.
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Note: The results are not exact but very close to the actual.
