Reopened bond set for cool reception on interest

The Central Bank of Kenya (CBK) has opted for a bond re-opening over a tap sale to raise Sh32 billion, an issue expected to receive cool reception due to low interest rates.

The bank re-opened the 15-year Treasury bond that closed last week with a coupon rate of 12.75 percent, with the sale ending Tuesday.

This is the first time the CBK has chosen reopening over a tap sale (unchanged terms) in a month a primary bond auction has been held.

“Subscriptions are expected to be lacklustre as a number of investors sit out, assessing the return of 12.74 per cent or below as not adequate compensation for a 15-year paper,” said analysts at investment bank Genghis Capital in a note to investors.

They said given that Treasury bonds with the same tenor of 15-years are trading at a yield of 12.6 percent, they expect bids to come in at between 12.6 percent and 12.8 percent.

Last week, the secondary market turnover surged 175.49 percent to close at Sh16.68 billion.