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Capital Markets

Low appetite for August bond on rate uncertainty

Central Bank of Kenya
The Central Bank of Kenya (CBK) headquarters in Nairobi. FILE PHOTO | NMG 

Investors showed lukewarm appetite for this month’s 10-year Treasury bond, with the Treasury managing to raise just half of the targeted Sh40 billion.

The Central Bank of Kenya (CBK) received a total of Sh29.82 billion from investors, accepting Sh19.36 billion.

Analysts said that investors have been wary of tying funds in medium and long term bonds at a time when there is uncertainty over the direction of interest rates due to the possible repeal of the rate cap law.

The CBK was also rejecting expensive bids, going by the fact that they left Sh10 billion on the table in a bond that was undersubscribed.

The average rate of accepted bids stood at 12.68 per cent, which is 0.22 percentage points lower than the last 10-year auction done in December 2017.

Churchill Ogutu, a macro-economic and fixed income analyst at investment bank Genghis Capital, said they don’t anticipate an immediate tap sale, but the CBK may re-open the paper at some later point in the financial year.

This was the second bond issuance in the current fiscal year and the first 10-year maturity in the year too.

Recent primary bond issuances have been longer-term papers aimed at lengthening the maturity profile of domestic debt.

This has seen the performances remain sub-par in a market that has shown little appetite for longer paper.

Last month, the Treasury floated a 20-year paper which raised 34.65 per cent of the offered Sh40 billion, while June’s 25-year bond was only able to raise a quarter of its Sh40 billion target.

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