12-year infrastructure bond sale closes today as analysts expect aggressive bidding

The Central Bank of Kenya (CBK) building along Haile Selassie Avenue, Nairobi. CBK cancelled last month’s bond issue due to unrealistic pricing by investors. PHOTO | FILE 

By CHARLES MWANIKI

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Summary

• The Central Bank of Kenya (CBK) cancelled last month’s bond issue due to unrealistic pricing by investors.
• Analysts at NIC Securities say that investors could be tempted to bid high again.
• Current infrastructure bonds in the market with similar tenors are trading between 13.3 and 13.5 per cent.

By REUTERS

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The sale of this month’s Sh30 billion 12-year infrastructure bond closes today, with analysts projecting another round of aggressive bidding from investors.

The Central Bank of Kenya (CBK) cancelled last month’s bond issue due to unrealistic pricing by investors, saying that the rates they were demanding would skew the yield curve.
Analysts at NIC Securities say that investors, aware that there is low possibility of a second straight cancellation—especially on an infrastructure bond—could be tempted to bid high again.
Current infrastructure bonds in the market with similar tenors are trading between 13.3 and 13.5 per cent, but NIC analysts say the bidding for the current issue could go up to 13.9 per cent.
“Based on the premise that the Treasury is less likely to reject all bids in this auction, we expect bidders to be aggressive and bid in the range of 13.6 to 13.95 per cent. However, should bidders be overly aggressive, they run the risk of Treasury accepting a small amount and opening a tap-sale soon after,” said NIC Capital analyst Dianah Irungu in a note.