Capital Markets

Treasury targets Sh50 billion from March bond sale

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The National Treasury building in Nairobi. PHOTO | SALATON NJAU | NMG

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Summary

  • The government’s fiscal agent, the Central Bank of Kenya, on Thursday opened the sale of a five-year, 15-year and 25-year bond and the period of sale closes on March 8.
  • The bond with 4.7 years left to maturity has a fixed interest rate or coupon of 11.277 percent while the one with 12.9 years to redemption has a fixed rate of 12.756 percent.
  • Retail investors will need at least Sh50,000 to bid for one of the bonds.

The National Treasury is seeking to raise Sh50 billion from three bond sales in March, comprising reopening of securities that were first auctioned between 2020 and last year.

The government’s fiscal agent, the Central Bank of Kenya, on Thursday opened the sale of a five-year, 15-year and 25-year bond and the period of sale closes on March 8.

The bond with 4.7 years left to maturity has a fixed interest rate or coupon of 11.277 percent while the one with 12.9 years to redemption has a fixed rate of 12.756 percent.

The longest-dated security with 24.2 years to maturity has a coupon of 13.924 percent. Investors could pay the full price, a discount or premium in the auction in what will influence the effective final return from the securities if held to maturity.

Retail investors will need at least Sh50,000 to bid for one of the bonds. The latest auction could be oversubscribed going by recent trends as institutional investors led by banks and pension funds seek to lock in high and stable returns amid new economic uncertainties.

The February infrastructure bond had sought to raise Sh75 billion but received bids of Sh132.26 billion. The CBK took Sh106.75 billion on the tax-free paper which also came with one of the highest fixed interest rates of 12.96 percent.

The high subscription on the 19-year infrastructure bond also helped the government’s bid to lengthen the maturity profile of domestic debt, currently at about nine years.

Investor interest in government bonds, which are deemed to have no credit risk, could rise further in the wake of the unfolding Ukraine crisis which is roiling markets worldwide.

Russia’s invasion of Ukraine has hit stock markets and raised the price of oil besides causing the depreciation of some currencies.

The panic has spread to the Nairobi Securities Exchange #ticker:NSE where more firms including blue-chips like Safaricom have recorded major declines in recent days.

Before the Ukraine crisis, the local stock market was on a slow recovery from the depths plumbed in the wake of the Covid-19 pandemic.

The August general election was the significant factor to watch out for as the health and economic impact of the pandemic receded.

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