The Treasury is targeting Sh60 billion from two bond auctions in January 2022, looking to take advantage of a lack of maturing debt in the month to close the domestic borrowing target for the year.
The Central Bank of Kenya (CBK), the State’s fiscal agent, said the first of the auctions will take place on January 4, for a reopened five-year bond first sold in 2020.
The second auction consists of two re-opened 10-year and 20-year papers first sold in 2018 and August 2021 respectively, whose sale will run until January 18.
The bonds will have 3.4 years, seven years and 19.7 years to maturity respectively, offering coupons of 11.67 percent, 12.5 percent and 13.44 percent.
The CBK rarely splits a month’s bond sale into two separate auctions, even when floating three-tranche offers.
The sales come in a period of rising liquidity in the money market, which bodes well for the prospect of raising the full amount. CBK said in its weekly bulleting last Friday that the liquidity is being supported by government payments that have offset tax remittances in the banking system.
The government has set a net borrowing target of Sh616.80 billion from the domestic market in the current fiscal year ending June 2022 and had borrowed Sh311.17 billion as of December 10.
Expenditure on servicing loans is pegged at Sh613.1 billion, out of which Sh262.1 billion will be principal repayments for domestic debt.
The higher target amount compared to the last two bond sales—Sh40 billion in December and Sh50 billion in November— is also indicative that the Treasury is bullish about raising a high amount of bids for the January sales.
The November and December sales both hit their targeted amounts, attributed to improved liquidity and the low target amounts.
The government received bids worth Sh41.17 billion for the December sale, while the November offer raised bids valued at Sh84 billion against a target of Sh50 billion.