CBK returns to seek extra Ksh.20B from May bonds


CBK returns to seek extra Ksh.20B from May bonds

In Summary

  • The tap sale which closes on May 19 is on the back of a Ksh.22.3 billion snub on investor bids in the primary issue as the reserve bank cut off overpriced bids.
  • The secondary sale announced on Monday was widely expected as the CBK and Treasury move to round off local borrowing ahead of the fiscal year in June.
  • As of March 31, Treasury had mopped up Ksh.648 billion in gross domestic borrowing, leaving behind a Ksh.205.8 billion gap to June’s Ksh.853.8 billion target.

The Central Bank of Kenya (CBK) has opened secondary bids for Treasury bonds issued in May from which it seeks to raise a further Ksh.20 billion in new borrowing for government.

The tap sale which closes on May 19 is on the back of a Ksh.22.3 billion snub on investor bids in the primary issue as the reserve bank cut off overpriced bids.

While investors made bids of Ksh.42.6 billion for the pair of bonds on offer this month, the CBK which presents Treasury’s primary local borrowing agent only accepted a partly Ksh.20.3 billion.

This to leave a Ksh.9.7 billion hole to the intended target of raising Ksh.30 billion to culminate in the need for a secondary sale.

CBK will be seeking to keep interest rates at 12.975 and 13.924 per cent for the re-opened 15 year and the new 25-year bond respectively.

Investor interests are meanwhile expected to once again concentrate on the longer-timed paper which offers relatively better yields to the takers.

In the primary sale for instance, investors bid Ksh.31 billion for the new 25-year issue in contrast with Ksh.11.6 billion for the shorter-timed paper.

The secondary sale announced on Monday was widely expected as the CBK and Treasury move to round off local borrowing ahead of the fiscal year close in June.

As of March 31, Treasury had mopped up Ksh.648 billion in gross domestic borrowing, leaving behind a Ksh.205.8 billion gap to June’s Ksh.853.8 billion target.

This means that Treasury must raise at least Ksh.68.7 billion every month to meet the annual local borrowing cycle.

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