Reopened Treasury bonds attract few takers

The Treasury received Sh32.47 billion from two re-opened bonds, nearly Sh8 billion less than the target.

The overall target was set at Sh40 billion, but the 20-year bond received only Sh10.33 billion in subscription or just a quarter of the total — underlining the market’s discomfort with long-term securities.

The 10-year bond had a much higher subscription of Sh22.14 billion or more than half of the floated amount, indicating short-term securities had more attraction for the market.

The Central Bank of Kenya (CBK), acting on behalf of the Treasury, picked only the lower-priced bids amounting to Sh26.55 billion, handing back nearly Sh6 billion to the investors in the monetary authority’s persistent drive to cut the cost of government debt.

For the 10-year bond, the CBK took less than half of the amount put in bids or Sh4.04 billion out of the Sh10.33 billion investors subscribed for.

For the 10-year bond, the interest rate of accepted bids came to 12.665 per cent down from the 12.669 per cent that investors had asked for.

This was compared to a yield of 12.686 per cent of accepted bids and 12.819 per cent return that the market asked for in the last such auction that was carried out on August 27.

For the 20-year bond, the yield of accepted bids was 12.931 per cent against market request of 13.087 per cent.

In the last such auction, the accepted bids were at 13.371 per cent while the market had asked for 13.411 per cent.

This indicates that the CBK has driven the rates for both bonds down by refusing to accept expensive bids.