Treasury seeks Ksh.50 billion from the local debt market in October


Treasury seeks Ksh.50 billion from the local debt market in October
File Photo of The National Treasury.

In Summary

  • The two bonds- a 20 year issue with 10.6 years to maturity and a 25 year issue maturing in 22.7 years are expected to be sold to investors between now and October 13.
  • Unlike preceding bond sales across July, August and September, the Treasury is expected to face up to normalizing liquidity which has recently constrained subscriptions into government debt through Treasury bills.
  • Earlier this month, the Treasury raised Ksh.64 billion from the local debt market after bids hit Ksh.81.7 billion against a target of Ksh.50 billion.

The National Treasury will be seeking to raise Ksh.50 billion from the domestic debt market next month with the Central Bank of Kenya (CBK) re-opening the sale of two bonds.

The two bonds- a 20 year issue with 10.6 years to maturity and a 25 year issue maturing in 22.7 years are expected to be sold to investors between now and October 13.

The CBK will be seeking to limit the interest rate paid out to investing stakeholders at 10 percent for the shorter-timed issue and 13.4 per cent of the long-dated paper.

Unlike preceding bond sales across July, August and September, the Treasury is expected to face up to normalizing liquidity which has recently constrained subscriptions into government debt through Treasury bills.

For instance, the CBK engaged investors last week in liquidity injections via reverse repos in the last week with the reserve bank seeking to preserve the availability of funds in the interbank market.

The liquidity dry up drive down subscriptions to Treasury bids in the last weekly issue with investors putting in bids amounting to a mere 29.7 percent of the Ksh.24 billion on offer.

Cytonn research analyst Rodney Omukhulu however expects subscriptions in bonds to remain elevated, bolstered by greater returns in comparison to T-bills.

“A lot of investors are looking for tentatively short term papers but not your average T-Bills. Considering the current low interest rate environment, investors have sought of waited on more attractive options,” he said.

Earlier this month, the Treasury raised Ksh.64 billion from the local debt market after bids hit Ksh.81.7 billion against a target of Ksh.50 billion.

The National Treasury is set to raise the limit of local borrowing to a net Ksh.554.6 billion by the end of June 2021 from an initial estimate of Ksh.494.3 billion.

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Story By Kepha Muiruri
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