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Capital Markets

Treasury snubs Sh46bn in closing bond offers

Central Bank of Kenya
Central Bank of Kenya building. FILE PHOTO | NMG 

The Treasury has raised Sh38.9 billion in the June Treasury bond issue, as a liquid market drove up investor interest and allowed Central Bank to leave more than half of the offered bids on the table.

The Treasury was seeking Sh40 billion in the last bond of the fiscal year, which was sold in two reopened 15-year tranches first floated in May last year and June 2012.

Investors offered a total of Sh85.6 billion on the bond, which has an effective maturity tenor of eight-and-a-half years (the 2012 reopen) and 14 years (the 2018 reopen).

They will earn 11.6 percent on the 2012 paper, and 12.45 percent on the 2018 tranche, with interest coming in higher on the 2018 paper as investors eyed the higher yield. They carried a coupon of 11 and 12.65 percent respectively in the offer prospectus.

Recent bond sales have been heavily subscribed by investors, CBK data shows, which points to a highly liquid market.

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May’s five and 15-year offer attracted bids worth Sh70.8 billion against an offer of Sh50 billion, while the Sh50 billion 10- and 20-year paper sold in April attracted bids worth Sh85.6 billion.

The interbank rate has dropped to a two-month low of 3.26 percent, indicating that banks are in a more comfortable cash position.

The healthy liquidity flows are also being seen on the Treasury bill auction. During last week’s sale, investors put up bids worth Sh27.8 billion against the offered Sh24 billion, with CBK accepting Sh17.3 billion.

The bulk of the offered cash was, however, on the one-year paper, which accounted for 94 percent of the bids.

The government’s appetite for money in the domestic market has somewhat abated in the past month, after it successfully raised Sh210 billion in the Eurobond in mid-May and followed that with a Sh75 billion loan from the World Bank.

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