Treasury targets Sh60 billion in August bonds sale

A pedestrian walk past the National Treasury building in Nairobi on June 12, 2014. FILE PHOTO | NMG

By CHARLES MWANIKI
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Summary

• The Treasury has opened the sale of a Sh60 billion bond for August, looking to take advantage of a liquid money market that has supported borrowing from the domestic market.
• The bond prospectus the Central Bank of Kenya (CBK) issued shows that the bond will be offered in three tranches, two of which are reopenings of 10 and 20-year papers first issued in 2019 and 2018 respectively, and one entirely new 20-year paper.
• Last month’s bond, which also had an advertised target of Sh60 billion, raised bids worth Sh116.9 billion out of which the government took up Sh79.9 billion.

The Treasury has opened the sale of a Sh60 billion bond for August, looking to take advantage of a liquid money market that has supported borrowing from the domestic market.

The bond prospectus the Central Bank of Kenya (CBK) issued shows that the bond will be offered in three tranches, two of which are reopenings of 10 and 20-year papers first issued in 2019 and 2018 respectively, and one entirely new 20-year paper.

Last month’s bond, which also had an advertised target of Sh60 billion, raised bids worth Sh116.9 billion out of which the government took up Sh79.9 billion.

This oversubscription was attributed to a combination of high liquidity in the market and investors being keen on government securities due to limited investment options in a tough economy.

“Healthy liquidity should boost demand for government securities amid a dearth of investment alternatives. This should for now bode well for the government’s local borrowing strategy,” said NCBA analysts.

The August bond will go towards general budgetary support, the CBK said in the prospectus and will be on sale until August 8. The government is looking to borrow a net of Sh658.5 billion from the domestic market this year, which will be combined with external borrowing worth Sh271.2 billion to fill in the budget deficit that is equivalent to 5.3 percent of gross domestic product.

Last month’s bond yielded a net of Sh55.5 billion in new borrowing due to part of the bond proceeds going towards rolling over maturities of Sh24.4 billion.

This month, there are no bond maturities, meaning that the government can, if it achieves a high subscription rate like it did in July, take up a significant portion of the domestic borrowing target.