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Capital Markets

Treasury seeks to stretch debt maturity with 20-year bond

National Treasury
The National Treasury building in Nairobi. FILE PHOTO | NMG 

The Treasury has again opted to issue a long-tenor bond in this month’s sale, looking to lengthen the maturity profile of domestic debt that has come down in recent years due to heavy uptake of short-term bills.

Central Bank of Kenya (CBK), which handles the debt sales on behalf of Treasury, said in the bond prospectus that it is reopening 20-year and 25-year papers initially floated in 2018, seeking Sh50 billion from investors towards budgetary support.

The two tranches have an effective period to maturity of 18.07 years and 23.32 years respectively, and carry a coupon rate of 13.2 percent for the 20-year and 13.4 percent for the 25-year. The sale of the bond opened Tuesday and will run until March 17. It comes at a time when the market is showing high liquidity, which should ideally help push up bid volumes. CBK has recently mopped up a total of Sh57.3 billion through seven-day repurchase agreements, out of bids worth Sh88.5 billion.

This has also been reflected in heavy bidding on Treasury bills—especially the one-year paper— as investors who are unsure of interest rate direction look for short term investments.

In February, the government accepted a total of Sh139 billion from five auctions, yet investors put in a total of Sh236 billion in the same month.

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On the other hand, last month’s bond which was in form of 15-year and 25-year tranches failed to realise its Sh50 billion target, with investors bidding Sh42.5 billion and the government accepting only Sh27.9 billion as CBK rejected expensive bids.

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