Treasury raises stakes as it seeks Ksh.70 billion in August bond sale

The National Treasury has upped the ante in domestic borrowing as it now seeks Ksh.70 billion in August’s infrastructure bond sale.

The raised target in the bond sale from Ksh.60 billion sort in July’s bond sale is attributed to the government’s quest to filter in high investor appetite for Treasury securities amidst COVID-19 led volatility in riskier investment classes.

The Central Bank of Kenya (CBK) will be eyeing to pay less for the 11 year tenured bond as it pegs a 10.9 percent coupon rate on the sale which runs to August 18.

High investor appetites for government securities has seen yields declining from the higher supply of investor funds along with CBK’s rejection of expensive bids.

The reopened, five, 10 and 15 year bond sale auctioned in July for instance saw bids with spreads of 10.56 percent, 11.67 percent and 12.40 percent against advertised coupon rates of 11.66 percent, 12.5 percent and 12.85 percent.

The bond attracted investor bids of Ksh.181 billion against a pre-advertised Ksh.60 billion with Treasury accepting Ksh.80.9 billion from investors.

August’s bond sale is seen attracting even higher subscriptions given the IFB tax free status.

The government’s domestic borrowing program for the 2020/21 financial year is therefore seen as a walk in the part given the heavy investor de-risking strategies.

The government is expected to lend a net Ksh.494 billion in the year to June 2021.