Treasury back in market to tap Sh22b in roads bond

What you need to know:

The tap sale has retained the same features as the last week’s issue that saw the Central Bank of Kenya (CBK) initially accept Sh27.6 billion.
CBK, on behalf of the Treasury, rejected more than Sh10 billion worth of bids because they were deemed expensive. However, the rejected bids are expected to serve as the starting point in raising the targeted cash.

The Treasury is seeking to raise Sh22.41 billion from investors who failed to get a slice of the recently floated infrastructure bond (IFB).

The tap sale has retained the same features as the last week’s issue that saw the Central Bank of Kenya (CBK) initially accept Sh27.6 billion. CBK, on behalf of the Treasury, rejected more than Sh10 billion worth of bids because they were deemed expensive. However, the rejected bids are expected to serve as the starting point in raising the targeted cash.

“The Central Bank of Kenya is pleased to offer eligible investors another opportunity to participate in a tap sale of the (IFB/2018/20) Treasury bond whose details are as in the prospectus issued value date 19/11/2018,” said the monetary authority in a notice to investors.

The CBK will accept bids in the period up to November 27 but it can close the auction earlier if it attains the targeted amount before then. It has the same yield of 12.156 per cent.

“The tap sale will be offered on a first-come-first- served basis,” said the CBK.

During last week’s auction of the IFB1/2018/20, the CBK received a total of Sh40.4 billion. But after the CBK declined some of the bids, analysts predicted it would go to the market this week with a tap sale.

“We anticipate a tap sale on the infrastructure bond, IFB1/2018/20yr, to mop-up the rejected cash from the initial auction and also endear to investors who were squeezed out by constrained initial sale period,” said investment bank Genghis Capital in a note to clients on Monday.