The Treasury has returned to the money market for an additional Sh24 billion from this month’s 12-year infrastructure bond.
The tap sale by Treasury was widely expected by players given that the CBK had only taken up Sh6 billion in the initial sale out of offers of Sh35 billion during last week’s initial sale.
The bond is targeting Sh30 billion to go towards funding of infrastructure projects in roads, energy and water sectors.
Investors had bid aggressively in the initial sale, demanding an average of 14.05 per cent. The Treasury therefore had the option of taking up a small amount of bids at a lower rate in the initial sale, then issuing a tap sale which would automatically be priced at the accepted yield that stood at 13.55 per cent.
“This is a clear signal from the regulator that (government securities) rates will remain below the upper limit of the bank rate cap. This is at odds with elevated government borrowing environment on one hand and yield-hungry investors on the other hand. However, the just announced tap sale for Sh24 billion may plug the borrowing deficit,” said Genghis Capital in a fixed income note released on Tuesday.
The tap sale closes Thursday—or Wednesday if the target amount is achieved, CBK said in the tap sale prospectus.
The tough stance taken by CBK against high bidding practices by investors saw the government cancel the 15-year reopened bond issue of January, which had also sought to raise Sh30 billion.
CBK governor Patrick Njoroge said at the end of January that the regulator would henceforth be accepting bids that keep in line with the prevailing yield curve for the respective tenors of government securities.
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