Re-opened primary bonds fall short of Sh40bn target

The Central Bank of Kenya. file PHOTO | NMG 

By JAMES NGUNJIRI

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Summary

• The re-opened 15-year and 20-year bonds attracted Sh32.76 billion out of the Sh40 billion offered.
• The sluggish performance was mainly attributed to low uptake of the longer-tenor bond (20-year), as the appetite for a number of pension funds has been biased towards the medium-term segment as opposed to longer duration.
• CBK had opted for re-opening of the two bonds to increase liquidity in the bonds and spur trading.

Two primary bonds issued this month raised less than the intended amount with the Treasury attracting Sh32.76 billion out of the Sh40 billion offered.

On Wednesday, analysts said they did not expect the Sh40 billion offered to be fully taken up.

The re-opened 15-year and 20-year bonds have 4.9 years and 19.9 years to maturity, respectively.

The sluggish performance was mainly attributed to low uptake of the longer-tenor bond (20-year), as the appetite for a number of pension funds has been biased towards the medium-term segment as opposed to longer duration.

This restrained the uptake in the 20-year paper.

The weighted average rate of accepted bids for the 15-year tenor rose marginally to 12.317 per cent from last month’s average of 12.299 per cent, as that of 20-year tenor slightly declined to 13.327 per cent from March’s 13.336 per cent.

“The 15-year tenor received bids worth Sh22.86 billion with Central Bank of Kenya (CBK) accepting Sh20.15 billion, while the 20-year issue attracted bids worth Sh9.90 billion as CBK accepted Sh6.78 billion,” it indicated in a notice on Friday.

CBK had opted for re-opening of the two bonds to increase liquidity in the bonds and spur trading.

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The 15-year bond in its initial auction raised Sh7.83 billion. The paper was re-opened in December 2017 with CBK accepting Sh4.68 billion.

The 20-year paper featured at the March primary auction and CBK accepted Sh8.49 billion. The subsequent tap sale attracted bids worth Sh7.77 billion which were fully accepted.

Last week, analysts said that in the current financial year, the secondary market turnover in 15-years bond has totalled Sh3.06 billion, which equals to Sh72.92 million in weekly turnover.

The two issues of longer and shorter maturities were seeking to attract a wider pool investors.