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Investors cagey on bonds as they await rate cap decision

Treasury Building in Nairobi
Treasury Building in Nairobi. FILE PHOTO | NMG 

Appetite for this month’s 10-year Treasury bond is likely to remain muted as investors wait for the Finance Bill to pass through Parliament to give clarity on the interest rate direction, analysts say.

The Bill proposes repeal of the interest rate cap, whose removal could trigger a rise in interest rates on government securities if banks start to shift towards private sector lending. The bond seeks to raise Sh40 billion for budgetary support with its sale due to close this week..

“Our initial expectation is for the paper to record moderate subscription with room for the apex bank to come back into the market to seek more funds through a tap sale,” said analysts at Kingdom Securities in a note to investors.

The Central Bank of Kenya has been keen on taming aggressive bidders to try and keep the rate low.

Analysts expect the weighted accepted rate for the bond to fall between 12.50 per cent and 12.80 per cent. This is the second bond issuance in the current financial year.

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