Treasury targets Sh40bn for budget in 15-year bond

The Treasury has floated a 15-year bond to raise Sh40 billion, which will primarily go towards budgetary support at a time the government is under little pressure to meet current financial year borrowing target.

Currently, the government’s domestic borrowing stands at Sh295.53 billion against a pro-rated Sh269.32 billion.

The new bond coupon is set at 12.65 per cent and the sale period ends on May 22, for a minimum investment of Sh50,000 a person.

“We opine that the longer bond maturity on offer will lengthen the debt maturity profile,” said Genghis Capital analysts in a market note to investors.

READ: Longer tenor T-bills push April uptake to 123pc in April

The bond to be listed on the Nairobi Securities Exchange (NSE) and the secondary trading in multiples of Sh50,000 will commence on May 29.

In April, the re-opened two primary bond issues with 4.9 and 19.9 years to maturity saw a sluggish performance mainly attributed to low uptake of the longer tenor bond (20-year bond).

During the auction, the Treasury was only able to attract Sh32.76 billion out of the Sh40 billion offered, recording a performance rate of 81.92 per cent.

Capital Markets Authority (CMA) data for the first quarter 2018, shows that in the primary Treasury bonds market, there were three new issues and five tap sales.

One was floated in January for a 15-year tenor paper, two in February both for 15 years, and two in March for the five-year and 20-years tenor.

The government had sought to raise Sh120 billion against which Sh131.30 billion worth of applications were received—accepting only Sh49.80 billion worth of bonds (excluding tap sales), indicating a 37.93 per cent acceptance rate.

In addition, Sh55.55 billion was raised from the five tap sales effected in the quarter resulting in a total of Sh105.35 billion from the bond issuances.

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