Treasury issues 10-year note seeking to raise Sh50bn

The Treasury is seeking to borrow Sh50 billion from the domestic market for budgetary support through a 10-year bond.

In the prospectus, Central Bank of Kenya (CBK), the selling agent, says the coupon of the bond will be market determined, with eyes on bidders to see whether they will raise their interest demands now that the rate cap on bank loans has been scrapped.

The Treasury is targeting new borrowing of Sh305.7 billion from the domestic market in the 2019/2020 fiscal year, which has informed the large-ticket size of bond issuances in recent months.

Last month, the government floated a 16-year infrastructure bond that had a target of Sh60 billion, managing to raise Sh68.4 billion from Sh86.94 billion bids.

The most recent 10-year bond was issued in August, part of a two tranche offer alongside a 20-year paper, that together sought to raise Sh50 billion. The 10-year tranche was more popular with investors, raising Sh45 billion from bids worth Sh52.8 billion, while the 20-year paper raised Sh14.7 billion from bids of a similar amount.

The interest rate on accepted bids for the August 10-year bond stood at 11.52 percent, which ideally should guide the pricing on the November issue.

Maturities will also play a part in the performance of the bond.

In November, a total of Sh77.3 billion is maturing in the domestic debt market, which will largely be rolled over by investors. Although the equities market has shown signs of recovery in the wake of the review of the rate cap law, fixed income remains an attractive destination for investments, largely due to its safety and consistent returns.