The Treasury has missed the Sh50 billion target for the five-year bond highlighting poor performance of government borrowing in the pandemic era amid underperforming tax collection.
Central Bank of Kenya (CBK) data shows the bond sale tapped Sh20.78 billion from investors in new borrowing after bids worth Sh34.53 billion were received.
The yields on the bond popped up by more than 81 basis points to a high of 11.667 per cent compared to previous 10.85 per cent offered on nine-year bonds of Sh21 billion and Sh60 billion in the last month.
The bonds were oversubscribed to Sh37.84 billion and Sh68.41 billion respectively.
Genghis Capital senior analyst Churchill Ogutu said the under subscription is a rare occurrence and could be much of supply issue than demand, with the sale period too short for investors to fill up the bids on offer.
“The under subscription comes as a surprise bearing in mind there is usually heavy demand on suchlike five-year tenors. Then again, the short sale window proved the Achilles heel in this month’s primary bond issue but we should expect a successful ensuing tap sale,” said Mr Ogutu.
“They (CBK) could reopen the 5-year to pick up the balance of 29.3Bn (from the 50 billion offered) they did not pick.”
The Treasury has been borrowing to boost the war on the Covid-19 pandemic and supplement external borrowing targets, coupled with recent downward adjustment in revenues.
Revenue target in the fiscal year has been lowered to Sh1.89 trillion in the post-Supplementary Budget II from Sh2.08 trillion, comprising of Sh1.64 trillion in ordinary revenue and Sh249.4 billion as Appropriations-in-Aid.
According to Mr Ogutu, the pressure on domestic borrowing follows a period when the country was behind the curve in its external borrowing, worsened by the Covid-19 shock that is not conducive to tap the international markets — be it a Eurobond issue or a syndicated loan.