The Treasury has only raised a third of the targeted Sh50 billion in this month’s infrastructure bond after sub-par bidding and rejection of expensive funds by the Central Bank of Kenya (CBK) in the auction.
Investors bid Sh29.4 billion for the 25-year bond, with the CBK accepting just Sh16.3 billion out of it at an average rate of 12.65 percent. Investors had bid an average of 12.83 percent, which analysts had said was on the aggressive side and was likely to be rebuffed by the CBK.
Kingdom Securities senior analyst Mercyline Gatebi had said in pre-auction note that conservative bidders were likely to demand between 12.2 and 12.5 percent, while aggressive investor were expected to demand between 12.5 and 12.8 percent.
Sterling Capital analysts expected investors to ask for an average of 12.5 percent, and to get 12.45 percent.
This is the first bond to be undersubscribed this year, following the huge interest seen in the January and February issues.
In January, when the Treasury floated two- and 15-year bonds looking for Sh40 billion, investors offered Sh101.9 billion in what was one of the biggest oversubscription seen for a local bond.
Last month’s Sh50 billion five- and 10-year paper attracted bids worth Sh78.3 billion, amid high liquidity in the market. The underperformance of the March bond means that it is likely the government will go back to the market in a tap sale, given that it still needs to raise funds to close the large budget deficit and to offset maturing debt.