The Treasury has re-entered the money market seeking Sh27 billion through two reopened 15-year bonds from which it took only Sh13.2 billion when they were floated just over a week ago.
In its advertisement for the tap sale, the Central Bank of Kenya (CBK) said it would take the bids for the reopened 2010 and 2013 bond issues on the basis of the respective yields of 12.676 per cent and 12.906 per cent that was accepted last week but added that allocation would be on a first-come first-served basis.
Initially, the Treasury managed to attract only Sh24.1 billion out of the Sh40 billion target in the reopened bond marking one of its poorest recent market performances.
Even with the lower subscription, the Treasury accepted only Sh13.2 billion in a bid to push interest rates down, leaving out about Sh10 billion worth of bids but also Sh27 billion below the target.
The two 15-year bonds were reopened, having been floated in 2010 and 2013, meaning that they had effective tenor of seven and 10-years respectively.
“The acceptance by the Treasury of only Sh13 billion means that it is really not desperate for cash. However, we expect that it will be back in the market in a tap sale to look for the other Sh10 billion it didn’t take up but was available in the market,” said Alexander Muiruri, a fixed-income expert with Kestrel Capital, in an earlier interview.
Mr Muiruri said the higher subscription for the bond with a longer tenor was mainly by fund managers, adding that bankers were hesitant to take up the bond on the shorter tenor even though they normally have a preference for the same.
Further, the lower rate on reopening for the 2010 bond means that the investors got it at a higher price this time round, even though they actually wanted to get the bond at an average rate of 12.764 per cent. The 2013 bond was accepted at 12.906 per cent lower than the average rate of 13 per cent investors had sought.