The Central Bank of Kenya (CBK) has mopped Sh45.8 billion from the recently reopened five-year and 10-year bonds.
The uptake beats the target of Sh25 billion after a huge investor interest where total bids topped Sh47.7 billion in the auction that closed on Thursday.
Investor focus was biased on the five-year paper which got bids of Sh35.5 billion, outpacing the 10-year security that secured Sh12.2 billion bids.
Accepted bids are expected to lock in a return of 18.41 percent from the re-opened five-year paper while the re-opened 10-year one has a return of 16.51 percent.
Investors purchasing the papers will also get small discounts that enhance the coupon (interest) rate set when the securities were first sold.
Total investor bids from the papers’ previous auction had reached Sh59.7 billion but the CBK only accepted Sh22.6 billion as the government's fiscal agent rejected aggressive bids.
Investors bid Sh23.8 billion on the 10-year paper at an average of Sh17.75 percent, defying the CBK guidance of a 16 percent return from the bond.
The five-year paper meanwhile had attracted bids of Sh35.8 billion at an average rate of 18.9 percent.
The CBK still rejected bids worth Sh1.9 billion in the tap sale that closed on Thursday.
The apex bank remains in the market, seeking Sh40 billion from the sale of the reopened two-year paper which has a coupon rate of 16.9723 percent and a remaining duration of 1.4 years in an auction set to close on April 17.
The reopened bond is expected to register substantive investor demand based on its short tenor even as the CBK is widely set to keep rejecting aggressive investor bids.
It is betting on the reduced sovereign risk from the recent issuance of a new Eurobond to reset the domestic yield curve downwards.
The pressure to fund the 2023/24 budget deficit from the domestic credit market is set to subside as the National Treasury revises the fiscal deficit downwards and from increased external financing, especially from multilateral lenders such as the World Bank and the IMF.
