Treasury snubs Sh36bn in sale of 15-year bond

Average interest on 15-year government debt issue continued to drop this month with cash-rich investors offering more than double what the Treasury is looking for.

The Central Bank of Kenya (CBK) Thursday said it received bids amounting to slightly more than Sh86.67 billion for the Treasury bond which was on sale between July 2 and July 23.

This was Sh46.67 billion or 116.69 percent more than the Sh40 billion the fiscal agent offered in the first bond sale of financial year ending June 2020.

The CBK said it snapped up close to Sh50.59 billion of the bids tabled by investors largely banks, fund managers and insurance companies, snubbing bids worth Sh36.10 billion for reasons including high interest rate demands.

Average yield on accepted bids was 12.34 percent, the lowest return compared with similar issues offered in January, February, May and June this year.

The reduced return was in line with expectations by investment analysts at Kingdom Securities, AIB Capital, Genghis and Sterling Capital who had separately predicted yields ranging from 12.25 percent to 12.55 percent.

Kenneth Minjire, the head of securities at Genghis Capital, however, said the 216.69 percent performance surpassed the market expectations of just over 100 percent subscription given it was the first issue with uncertainty around interest rate ceilings still persistent.

“The performance was impressive given that even banks which have shorter tenures (those with tenure limits within their business,) were locked out and it shows the market is still very hungry,” Mr Minjire said.

“The competitive bidding was quite conservative meaning investors were keen on getting an allocation as opposed to getting a superior yield. I expect the paper to trade quite actively once it lists next week because we are already seeing a lot of interest from investors who were not successful at the auction.”