The Treasury is this month seeking Sh50 billion through bond issues, hoping to ride on the huge investor interest in last month’s auction and a liquid money market.
Central Bank of Kenya said in a bond prospectus published on Thursday that the bond would be issued in two tranches of five- and 10-year tenors, with the shorter paper likely to excite investors who have been clamouring for short tenor in recent months.
The bond is on sale until February 19 and the rate is market determined.
Last month, the Treasury was in the market for Sh40 billion in a two-year and 15-year bond issue, which received total bids of Sh101.97 billion with acceptances of Sh38.5 billion.
The Treasury re-opened the paper for a four-day sale on January 31 with a target of Sh12 billion. The sale attracted bids of Sh66 billion with just Sh23.4 billion accepted.
“The February five- and 10-year issue is Sh10 billion higher than the usual auction size, which we believe is driven by the success seen in the January auction,” said Genghis Capital in a market note. The sale comes at a time of high market liquid, with the interbank rate falling to 2.17 per cent on Wednesday from 5.45 per cent on Monday. Analysts at Commercial Bank of Africa in their latest weekly fixed income note said the heavy liquidity in the market is also helping the Treasury meet the goal of raising more funds from the domestic market while keeping yields low. So far in this fiscal year, CBA said, the government has raised Sh149 billion in new domestic debt, against a full-year target of Sh310 billion.
“Given that revenue performance remains below expectations, we expect the Treasury will be more tactical in ensuring successful fundraising with potential for more blended issues of shorter and longer term papers,” said CBA. The ample demand for treasuries has also allowed the Treasury to cut significantly its outstanding overdraft at Central Bank, from Sh63.9 billion at the beginning of January to Sh37.6 billion by January 25.