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Treasury’s 30 billion bond falls short by 83pc as bids rejected

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Central Bank of Kenya. file photo | nmg

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Summary

  • The Central Bank of Kenya (CBK), government’s fiscal agent, yesterday said it accepted bids worth Sh5.19 billion on Wednesday against the Sh30 billion the Treasury was targeting for the 10-year bond.
  • The CBK received bids worth Sh19.043 billion, a 63.48 per cent subscription, but rejected bids valued at Sh13.85 billion from investors who demanded higher returns.
  • The Treasury plans to borrow about Sh268.6 billion from the domestic markets to partly bridge the Sh524.6 billion deficit for this financial year’s Sh2.29 trillion budget.

Government’s domestic borrowing plan for the new financial year kicked off on a low note with the first major Treasury bond auction falling short by a significant 82.7 per cent.

The Central Bank of Kenya (CBK), government’s fiscal agent, Thursday said it accepted bids worth Sh5.19 billion on Wednesday against the Sh30 billion the Treasury was targeting for the 10-year bond.

The CBK received bids worth Sh19.043 billion, a 63.48 per cent subscription, but rejected bids valued at Sh13.85 billion from investors who demanded higher returns.

READ: 30-year bond interest about 13 per cent

The Treasury plans to borrow about Sh268.6 billion from the domestic markets to partly bridge the Sh524.6 billion deficit for this financial year’s Sh2.29 trillion budget.

“I think the Central Bank and GOK (the government) sent the correct signal to the markets: they are not short of cash and will not take money at any price,” Nairobi-based investment analyst and chief executive of Rich Management Aly-Khan Satchu said via an email. 

Accepted bids will attract an average interest of 12.966 per cent, which is 2.694 percentage points lower than the weighted market average rate of 13.325 per cent.

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