The Treasury has kicked off the sale of the current fiscal year’s last bond offer, with a liquid money market expected to support bid volumes.
The June bond is a reopening of two 15-year offers that were first sold in May last year and June 2012 and is seeking to raise Sh40 billion for budgetary support.
This effectively means these bonds will mature in eight-and-a-half years (the 2012 reopen) and 14 years (the 2018 reopen).
Analysts say the current market conditions where yields are trending lower and uncertainty over the long-term direction of interest rates favour short- to medium-term bond offers.
“Expectations of a further decline in yields will continue to favour duration play, with concentration on the seven- to 10-year tenors. Yields on the shorter end have dropped fairly fast and the curve is fairly flat for tenors above 10 years,” said Commercial Bank of Africa analysts in a fixed income note last week.
It is likely, therefore, the 2012 reopened paper will garner higher interest compared to the 2018 paper. In the initial sales, the May 2018 paper had a rate of 13.08 percent while the 2012 reopened paper had a rate of 12.08 percent in the initial auction.
They now carry a coupon of 12.65 and 11 percent respectively in the offer prospectus the Central Bank of Kenya published on Friday, signalling that the regulator is perhaps anticipating lower yield demands partly to account for the reduced period to maturity for the paper.
Recent bond sales have been heavily subscribed by investors, the CBK data shows, which will likely be sustained in this offer.
May’s five- and 15-year offers 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.