CBK turns to longer tenors with Sh40 billion bond float

What you need to know:

The Sh40 billion bond on sale between July 6 to July 24 has a coupon rate of 13.2 per cent for a minimum investment of Sh50,000 per person.
Analysts expect the CBK action will further depress secondary market turnover in the week.

The Central Bank of Kenya (CBK) has floated a 20-year Treasury bond—the first in the current financial year—indicating it is keen on stretching the debt maturity profile.

The Sh40 billion bond on sale between July 6 to July 24 has a coupon rate of 13.2 per cent for a minimum investment of Sh50,000 per person.

Analysts on Monday said at this point of the financial year, they expected the fiscal agent to be in an aggressive mode issuing a shorter-term paper as it accelerates into borrowing gear.

“We are not optimistic that the longer-term paper will be positively absorbed by investors hot on the heels of a sub-par performance of a similar tenor issued two months ago,” said analysts at Genghis Capital in a market note to investors.

They expect the CBK action will further depress secondary market turnover in the week.

The bond will be listed on the Nairobi Securities Exchange (NSE) and secondary trading in multiples of Sh50,000 will commence on July 31.

During the last half of 2017/2018 financial year, which ended on June 30, performance in the primary Treasury bond auctions was varied between the various issues, with the subscription rate averaging 87.3 per cent.