The Central Bank of Kenya headquarters in Nairobi. FILE PHOTO | NMG
The Treasury raised less than half of the targeted Sh40 billion in this month’s Treasury bond sale, which was floated at a time when the shilling liquidity in the money markets has been tight due to mopping up activity by the Central Bank of Kenya (CBK) in recent weeks.
CBK, which is the government’s fiscal agent, said that the bond raised a total of Sh18.26 billion, with investors having bid a total of Sh24.34 billion.
The bond was in form of two reopened 15-year papers that were initially sold in 2012 and 2019, effectively giving them 6.82 and 13.48 years to maturity respectively.
The bond will pay on average 11.46 per cent interest on the 2012 option, and 12.81 per cent on the 2019 option.
Investors were keener on the longer paper, however, offering Sh15.1 billion on it compared to Sh9.26 billion on the 2012 paper.
This indicated that they were more interested in the higher yield on offer and less concerned about committing their funds for a longer duration.
Analysts had pointed out however that banks, the biggest buyers of government paper, were unlikely to rush into the offer given their immediate liquidity needs.
“Immediate liquidity needs for banks could keep the subscription rate lower than this year’s average...( due to) increased demand for shillings in the market linked to traditional year-end bank balance sheet enhancement activities as well as an anticipation of quarter end corporate tax settlements,” said NCBA analysts in a note before the auction.
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