Treasury targets Ksh.50 billion in March bond sale


Treasury targets Ksh.50 billion in March bond sale
File Photo of The National Treasury.

In Summary

  • Proceeds from the sale of the bond carried out by the Central Bank of Kenya (CBK) are expected to go towards budgetary support as the government races the clock to June 30 to meet its domestic borrowing targets.
  • CBK has recently favoured the re-opening of trading bonds over the issuing of new ones as the reserve banks fights off aggressive bidding for higher interest rates by investors.
  • Aggressive bidding on new bonds remained profound as the CBK rejected bids worth Ksh.13.2 on its new-15 year bond issue while rejecting a further Ksh.1.4 billion on its pre-determined 25-year issue.

The National Treasury has set its sights on raising Ksh.50 billion from the domestic credit market through its routine monthly bond sale.

Proceeds from the sale of the bond carried out by the Central Bank of Kenya (CBK) are expected to go towards budgetary support as the government races the clock to June 30 to meet its domestic borrowing targets.

Investors are expected to tap onto the re-opened 20-year and 25 year fixed coupon bonds whose time to maturity presently stands at 18.1 and 23.3 years respectively.

The bonds coupon rates meanwhile sit at 13.2 and 13.4 per cent respectively and in essence define the expected return for the potential bond investors.

CBK has recently favoured the re-opening of trading bonds over the issuing of new ones as the reserve banks fights off aggressive bidding for higher interest rates by investors.

In February, aggressive bidding on new bonds remained profound as the CBK rejected bids worth Ksh.13.2 billion on its new-15 year bond issue while rejecting a further Ksh.1.4 billion on its pre-determined 25-year issue.

Meanwhile, the weighted average rate for accepted issues in February’s sale stood at 12.8 and 13.6 percent respectively against market weighted rates of 13 and 13.6 percent respectively.

“We are seeing the CBK trying to manage both yields and maturities in the rejection of expensive bids,” said Sterling Capital Head of Research Renaldo D’Souza.

During the course of February, Treasury fell Ksh.22.1 billion shy of its targeted Ksh.50 billion bond sale as the CBK cut out expensive offers from Ksh.42.5 billion worth of bids.

The National Treasury is set to come under pressure from a combination of a high return by investors and the shunning of long-tenured Treasury issues in the face of long-term uncertainties.

This is even as the government comes under pressure to meet its domestic borrowing target in the run in to the end of the current fiscal year in June.

As at January 31, gross domestic borrowing by Treasury stood at Ksh.304.8 billion against the overall Ksh.514 billion target for the year.

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Story By Kepha Muiruri
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