Treasury raises Ksh.22.9 billion in March bond sale

The National Treasury has raised a total of Ksh.22.9 billion in new borrowing through its March bond sale.

The near month long auction saw bids worth Ksh.35.2 billion against a target of Ksh.50 billion to represent a performance rate of 70.3 per cent.

While the subscription rate on the 20-year and 25-year reopened bonds is somewhat subdued from the higher performance of 85 per cent on February, the investor bids are still substantive for the longer-tenured issues.

The acceptance of the bids by the Central Bank of Kenya (CBK) have meanwhile been routine to recent issues with the reserve bank favouring bids towards the long-end tenure.

This is us the CBK finds leverage from its advanced domestic borrowing program allowing it to focus on lengthening the maturities of Kenya’s domestic debt profile.

The CBK accepted bids worth Ksh.14.6 billion on the re-opened 25-year bond issue from Ksh.15.3 billion in investor bids while rejecting in excess of Ksh.11 billion on the 20-year reopened issue.

The CBK has nevertheless had to face off against aggressive bidding as investors chase down a greater pay pout from the on boarded longevity risks.

As such, the weighted average rate of accepted bids stood slightly higher than the bond’s coupon rate at 13.3 and 13.8 per cent respectively from market weighted average rates of 13.5 and 13.8 per cent.

Analysts expects the high bank liquidity to support future long-tenured bond issues even as distortions remain in hindsight from dollar purchases by the CBK and competition from the bond’s treasury market.

“High commercial bank liquidity will have a bearing on the debt auction activity and we expect to see above normal participation in this auctions in spite of the longer tenures,” noted researchers as Sterling Capital.

Proceeds from March’s bond sale will be deployed towards budgetary support while the CBK is expected to issue the next government bond issue in April.