Capital Markets

Treasury eyes Sh40bn for budgetary support with two new bonds

The National Treasury building in Nairobi. File photo | nmg
The National Treasury building in Nairobi. File photo | nmg 

The Treasury has floated two new bonds issues for this month to raise Sh40 billion for budgetary support.

The two, five-year and 20-year tenor papers are on offer until next Tuesday, for a minimum investment of Sh50,000 per person subscribing.

The government, through the Central Bank of Kenya (CBK) as the agent for the fundraising, is expecting to take advantage of the current liquidity in the market.

The five-year bond coupon rate will be market determined, while the 20-year offer has a coupon rate of 13.2 per cent.

“The Consultative Forum of Domestic Debt met in the course of the week and as per market expectation, has issued benchmark issues of five years and 20 years seeking to raise Sh40 billion.

“The market had been starved of long-end bond issue and we expect healthy subscription,” said Genghis Capital analysts in a market note to investors yesterday. Interest or discount will be subject to withholding tax at a rate of 15 per cent for the five-year bond and 10 per cent for the 20-year bond.

The two bonds will be listed on the Nairobi Securities Exchange and the secondary trading in multiples of Sh50,000 will commence on March 27.

The redemption dates are March 20, 2023, in the case of the five-year tenor paper and March 1, 2038, for the 20-year bond.

In February, the month’s bonds issues were undersubscribed with the Treasury receiving bids worth Sh24.14 billion against an offer of Sh40 billion — amounting to a 60.35 per cent subscription rate.