Treasury picks Sh5bn from oversubscribed infrastructure bond

The National Treasury has picked only Sh5 billion out of a possible Sh55.8 billion that investors subscribed for in an infrastructure bond floated last week.

In a statement announcing the results of the auction, Central Bank of Kenya acting director for financial markets, John Birech, said that the new borrowing by the Treasury would be only Sh5.04 billion.

The government was seeking Sh40 billion in a 15-year bond and was offering to pay investors 12.5 per cent as a coupon (interest) annually.

The subscription of Sh55.756 billion was a 139.39 per cent performance rate – well beyond the amounts sought.

READ: Treasury eyes Sh40bn from well-paying new roads bond

Average yield

The weighted average yield that investors were asking for stood at 13.026 per cent.

This means that they wanted to get it at a discount in order that their eventual return is higher than what is represented by the interest paid on it.

READ: Treasury raises Sh42bn from oversubscribed infrastructure bond

However, the Treasury took the paper at a yield of 12.505 per cent, just about the same as the coupon or interest to be paid on the paper.

The Treasury rejected all the expensive bids as it tries to keep the price of public debt low. In the previous auction for such a bond the rate was 13.177 per cent, but has now only taken those bid with no more than 12.5 per cent yield.