The Treasury netted Sh63.75 billion in this month’s bond sale that closed last Tuesday, significantly closing the domestic borrowing target at a time when revenue performance remains behind the target.
Central Bank of Kenya (CBK), the fiscal agent, said investors bid a total of Sh69.9 billion in the five and 10-year dual-tranche offer, which sought to raise Sh50 billion. The bond was boosted by rising liquidity in the market. The interbank rate — a good measure of bank liquidity positions — has fallen to 3.83 percent from 5.45 percent at the beginning of the year, while CBK liquidity mop-ups through repurchase agreements have been yielding bids well above target.
Investors were keen on the five-year tranche due to the dearth of short-term bond offers in recent months, with the government raising Sh44.5 billion on this tranche and Sh19.3 billion on the 10-year.
Both tranches were reopening of bonds initially floated in February last year, and are thus due to mature in February 2024 and 2029 respectively for the five and 10-year papers.
The Treasury has been under pressure to accept a larger proportion of investor bids in auctions as it races to fill a financing gap that has been widened by the supplementary budget.
“We expect aggressive borrowing from the domestic market in respect of the remainder of the borrowing target as well as the Sh146.3 billion funding gap from the supplementary budget part of which will be financed through domestic borrowing,” analysts at investment bank Sterling Capital said in a fixed income report.
Total domestic borrowing as at the end of November 2019 stood at Sh221.8 billion, equivalent to 43.2 percent of its total revised target of Sh514 billion from Sh429.4 billion.