Treasury out to raise Sh40 billion via two bonds

The Treasury intends to raise Sh40 billion with the Central Bank of Kenya (CBK) reopening two 15-year tenor papers that have effective maturities of 7.06 and 10.15 years respectively.

The offers come with a coupon rate of 10.25 per cent per annum (7.06 years tenor paper) and 12 per cent per annum (10.15 years) respectively.

With a minimum investment of Sh50,000 an investor will earn an interest of Sh5,125 (7.06 years), and Sh6,000 (10.15 years). Interest payment dates are in two equal instalments six months apart.

“Payments above Sh1 million must be made by RTGS, payments below Sh1 million may be made by cash, banker’s cheque or RTGS transfer and must reach the CBK not later than February 26,” CBK said in a notice on Tuesday.

Interest will be subject to 10 per cent withholding tax. They will be listed on the Nairobi Securities Exchange (NSE) and secondary trading in multiples of Sh50,000 and commence on February 27.

READ: Treasury raises Sh36bn in mega projects bond offer

Analysts said the CBK still seems reluctant to issue paper above 10 years despite the key variables being in the green.

Last month, the Treasury issued a 15-year bond with an effective tenor of 13 years, and a coupon of 12.5 per cent, to raise Sh40 billion for infrastructural projects in the current fiscal year. The bond was oversubscribed attracting bids worth Sh55.75 billion resulting in acceptance of just Sh5 billion worth of the bids.

The Treasury consequently issued a tap sale on the bond at the weighted average yield of 12.5 per cent to raise Sh35 billion, and received Sh36.2 billion, a 103.5 per cent subscription rate.

“It appears that rates have been kept artificially low by the government through rejection of bids they deem expensive, despite pressure from investors who are demanding higher rates,” said analysts from Cytonn Investments.