Treasury raises Ksh.81 billion in debut 2020/21 bond sale


Treasury raises Ksh.81 billion in debut 2020/21 bond sale
File Photo of The National Treasury.

In Summary

  • The auction which saw the re-opening of three bonds tenured at five, 10 and 15 years was three times oversubscribed with total bids totalling Ksh.181.8 billion with Treasury continuing to reap benefits of high liquidity in the market.
  • Investors haver continued to favour investments in government as they view it as a safe heaven store of value under uncertainities brought forth by the Covid-19 pandemic.
  • The high investor appetites have seen the Treasury enjoy lower interest rates as the Central Bank of Kenya (CBK) further steps up its rejection of expensive bids.

The National Treasury domestic borrowing program through bonds has been off to a flier raising Ksh.80.9 billion in new proceeds against a Ksh.60 billion target.

The auction which saw the re-opening of three bonds tenured at five, 10 and 15 years was three times oversubscribed with total bids totalling Ksh.181.8 billion with Treasury continuing to reap benefits of high liquidity in the market.

Investors haver continued to favour investments in government as they view it as a safe heaven store of value under uncertainities brought forth by the Covid-19 pandemic.

Greater investor focus remained on the short end of the yield curve as the five year bond attracted the highest bids at Ksh.65.3 billion in line with analyst expectations.

“In the current market environment where concerns over the spread of corona virus remains high, interest rate uncertainty prevail, and liquidity is elevated, investors are likely to focus on the shorter end of the yield curve,” noted AIB-AXYS Africa Research in its July primary auction note.

The high investor appetites have seen the Treasury enjoy lower interest rates as the Central Bank of Kenya (CBK) further steps up its rejection of expensive bids.

The market weighted average rate of the accepted bids had a spread of 10.56 percent, 11.67 percent and 12.40 percent against an underlying coupon rate of 11.66 percent, 12.5 percent and 12.85 percent.

Interest rates on both Treasury bonds and bills have been on declining rate supported in large part by high and competitive bidding among investors.

The weighted average rate of accepted bids during July’s auction of a re-opened, five-year and 10 year bond for instance came in at a higher 11.18 percent and 12.41 percent.

The prevailing low interest rates have also impacted CBK’s repurchase agreements and the interbank lending rate.

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Story By Kepha Muiruri
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