The uptake of this month’s five-year Treasury bond issue dropped to 66.92 per cent compared to September performance of 147.6 per cent due to tight liquidity in the market.
An auction update from Central Bank of Kenya (CBK), the government’s fiscal agent, indicated that out of the Sh30 billion target, only Sh20.076 billion worth of bids were received.
Out of this, the Treasury accepted Sh13.5 billion. The market weighted average for the auction was 12.621 per cent.
Market analysts said investors should expect a tap (reopened) sale this week.
“The auction underperformed due to tight liquidity, we are not quite certain what is happening, but we anticipate that tea farmers bonus expected later next (this) week should help ease the tight liquidity situation in the market,” said Stanslaus Kimani, a fixed income dealer at NIC Securities.
There were higher expectations of strong demand for the five-year paper owing to historically large appetite from institutional investors.
Given that the government is behind its domestic borrowing target, analysts were expecting investors to bid slightly above the secondary market yield, which was 12.4 per cent for a similar tenor bond. Expectations were in the range of between 12.4 per cent and 12.6 per cent for this particular issue.
In September, the CBK had issued a two-year bond and re-opened a 10-year security.
The auction was described by analysts as quite successful with the robust performance rate of 147.6 per cent signalling solid investor appetite for the government papers. A similar high acceptance rate was recorded at 90 per cent.