National Treasury building in Nairobi. FILE PHOTO | NMG
Monthly domestic debt repayments will fall to their lowest level in the current fiscal year this month, allowing the Treasury a chance to close further the borrowing target.
Payments for December are estimated at Sh67.4 billion, owing to a decline in lower Treasury bond maturities in the period.
The maturing debt comprises Treasury bills maturities worth Sh58.7 billion and the partial maturity of Sh8.7 billion of an infrastructure bond sold in 2015.
Recent months had seen heavy maturities, which put pressure on the government to take up more money to satisfy new borrowing needs. Maturities stood at Sh136 billion in November and Sh153 billion in October.
“There will be a significant reduction in domestic debt service for the month.
“This is the lowest redemption amount in the 2020/21 fiscal year,” said investment bank Sterling Capital in a fixed income note.
“The reduction in redemptions in December point towards a larger proportion of funds raised in debt auctions directed towards new borrowing.”
The decline in the repayments coincides with a period of low liquidity, partly owing to an aggressive mop-up by the Central bank in recent weeks to control shilling volatility.
This, the analysts at Sterling said, is likely to see upward pressure on interest rates on the Sh40 billion December Treasury bond sale, which closes today.
In their analysis, fellow investment bank Genghis Capital said the fact that the sale is concluding early in the month would help in avoiding the worst of the liquidity crunch that is anticipated for the latter part of December.
“We anticipate the cyclical deposit mobilisation will dent liquidity levels in the latter part of the month.
“Thus, the re-opening of the papers is timely just before liquidity dries up,” said Genghis in their bond auction note.
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