Treasury snubs Sh25 billion at bonds auction amid high liquidity

The 10- and 20-year Treasury bonds were heavily oversubscribed in the latest auction with investors putting in a total Sh85.62 billion against an offer of Sh50 billion.

The Treasury took Sh60.35 billion–through its fiscal agent Central Bank of Kenya (CBK) – and left the rest of the cash amounting to just over Sh25 billion on the table.

Expensive bids were shut out of the auction helping the government acquire money at low interest rates. Liquidity has also helped keep the rates falling.

“As long as we have the rate caps and there is enough liquidity, the Central Bank can continue to go for the lower rates. Many are going for the Treasury bonds and bills and so their demand is high, so rates will also go down, even if marginally,” said Harrison Gitau, a research analyst with Nairobi-based ApexAfrica Capital.

He said the availability of cheap cash is a result of the crowding out of the private sector which is currently not able to borrow much from commercial banks that perceive the risk of lending to the sector high compared to that of the government.

In the latest auction investors asked to be paid an interest rate of 12.346 percent for the 10-year paper but the Treasury accepted 12.3 percent.

In the previous auction for a 10-year paper held in February, the market wanted 12.463 percent, but the bids that were accepted were at 12.438 percent.

The 20-year bond also saw the rate come at 12.873 percent, from the 12.931 percent recorded in the previous auction. That indicates a decline of the rates compared to the previous auction – underlining the authorities push for lower borrowing rates.