Treasury misses February bond sale target by Sh22 billion

The government raised Sh27.9 billion in the February Treasury bond sale, missing its Sh50 billion target as the policy of rejecting expensive bids continued.

The Treasury was seeking the Sh50 billion in two tranches of 15 and 25-year papers, the latter a reopening of a bond first issued in June 2018.

Investors bid Sh18.44 billion on the 15-year paper, out of which the Central Bank of Kenya (the government’s fiscal agent) accepted only Sh5.2 billion. The 25-year paper performed better with bids worth Sh24.06 billion and acceptances of Sh22.68 billion.

On the shorter bond, investors on average demanded 13.04 percent in interest, with the average rate ion accepted bids at a lower 12.76 percent. This pointed to the regulator rejecting most bids on this paper due to what it deemed excess rate demands.

The weighted average of bids on the 25-year paper at 13.64 percent was much closer to the acceptances rate 13.59 percent, hence the higher amount in accepted bids. The underperformance was despite the market being fairly liquid during the period of sale due to government payments to it departments and agencies— reflected in the continuing oversubscription in the Treasury bill auctions. Analysts had projected the February bond sale to perform below par on the basis of the long tenors of the two tranches, with Sterling Capital forecasting aggressive bidding due on investor demand for a duration risk premium.

AIB Capital said in its pre-auction note that it expected medium to low subscription for the bond.

All the proceeds of the bond sale however go into government books as new borrowing, given the lack of bond maturities this month.