Capital Markets

Treasury raises Sh36bn in mega projects bond offer

Reopened auction fetched Sh1bn more than target amount on high liquidity. FILE PHOTO | NMG
Reopened auction fetched Sh1bn more than target amount on high liquidity. FILE PHOTO | NMG 

The Treasury has raised Sh36 billion through an infrastructure bond with interest rate of 12.5 per cent, indicating the Central Bank of Kenya (CBK) is no mood to accept expensive bids.

The fundraising came through a tap or reopened sale, a second offer for the same bond that had seen the Treasury accept only Sh5 billion initially.

Liquidity in the market enabled the Treasury to get Sh1 billion more than the Sh35 billion sought in the tap sale as widely expected by securities’ dealers and analysts.

This followed an initial floating of Sh40 billion that was oversubscribed with Sh55.7 billion put in by investors but at a yield of more than 13 per cent.

The authorities rejected expensive bids and only accepted the Sh5 billion in the first offer at about 12.5 per cent.

“The offer was filled with Sh36.21 billion in the two-day sale period — an indication of the attractiveness of the bond albeit the initial massive rejection of the bids,” said Genghis Capital in a note to investors.

The analysts noted that the amount of the bids exceeding the Sh35 billion offer happened due to improved liquidity where the average interbank rate came down and the Treasury bill offers were also oversubscribed.

“The average interbank rate declined 45 basis points to 5.95 per cent in the week…Liquidity condition improved in the week with the CBK keeping off open market operations,” said Genghis Capital.

The analysts said the end of the cash crunch will also contribute to the success of the fixed-income auctions this week.

“We expect the improved liquidity condition in the market will help support T-Bill auction and the short-end bond trading in the coming week,” said Genghis.