Treasury raises Sh24bn from 12-year reopened bond

Money Markets

The sale of the infrastructure bond was expected to strengthen the shilling in the short term by attracting foreign inflows. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• All the subscriptions to the bond were accepted and allotted at the same fixed yield rate of 11.55 per cent like in the first sale of the bond.
• The infrastructure bond is meant to fund medium and long-term projects in the transport and energy sectors.
• There has been high demand for government primary issues, with the auctions for the 182-day and 364-day Treasury Bills worth Sh7 billion this week attracting bids amounting to Sh12.2 billion at 10.24 and 10.56 per cent in yield respectively.

The 12-year Sh25 billion infrastructure bond tap sale (reopening) has raised Sh24 billion, meaning the Treasury has achieved its target of netting Sh50 billion from the issue.

All the subscriptions to the bond were accepted and allotted at the same fixed yield rate of 11.55 per cent like in the first sale of the bond.

The initial sale of the infrastructure bond done in the last week of March was oversubscribed 106 per cent, attracting 1,101 bids worth Sh51.6 billion.

Some 823 bids worth Sh25.7 billion were accepted, with the government then moving fast to secure the extra demand through reopening the sales from April 1 to April 8.

The infrastructure bond is meant to fund medium and long-term projects in the transport and energy sectors.

There has been high demand for government primary issues, with the auctions for the 182-day and 364-day Treasury Bills worth Sh7 billion this week attracting bids amounting to Sh12.2 billion at 10.24 and 10.56 per cent in yield respectively.

READ: CBK in Sh25bn bond tap sales after oversubscribed infrastructure issue

This happened even as the sale took place simultaneously with the infrastructure bond, which has in the past been seen to divert investor demand away from the short-term securities sold concurrently.

The sale of the infrastructure bond was expected to strengthen the shilling in the short term by attracting foreign inflows, as well as mopping up some of the liquidity in the market.

“Whether or not the infrastructure bond tap sale helps the shilling will depend on foreign investor uptake. If they take up a significant portion then we expect good inflows. However we must also consider the fact that local commercial banks, pension funds and other institutional investors also bid for the paper,” said Bank of Africa dealer Robert Gatobu.

In terms of mopping up excess liquidity, Mr Gatobu said the effect of the bond will depend on the maturity redemptions lined up for this month, which eventually determine how much of additional government borrowing can be classified as ‘new borrowing’.

The shilling has been edging towards the 93 level this week, even as CBK moved into the market with dollar sales to check volatility as it nears yet another key psychological level.

Dealers said the shilling weakened slightly on Thursday to 92.75/85 units to the dollar having opened the day at 92.70/80.