Treasury Seeks Ksh.40B From December Bonds, Scoops Ksh.19B From Extended November Sale

By Kepha Muiruri

The National Treasury is seeking to tap Ksh.40 billion from the domestic credit market through bonds in December to close off local borrowing in the calendar year.

The Central Bank of Kenya (CBK) has invited investor bids for two (20 & 25 year) bonds with a time to maturity of 5.6 and 24.9 years respectively.

The two papers which have a coupon rate of 13.75 and 14.188 per cent will be on offer to investors until December 6.

The bonds are nevertheless expected to largely underperform the recently issued November infrastructure bond which raised Ksh.75.6 billion for government in its primary sale.

Comparatively, the infrastructure bond has high demand from investors based on its tax-free status while the performance of the re-opened bonds is more often dismal from investors’ apathy.

On Tuesday, the CBK surprisingly took up Ksh.19.1 billion from the extended sale/tap sale of November’s infrastructure bond against a target of mopping up just Ksh.5 billion through the auction.

While the reserve bank has not interpreted its reasoning in accepting the higher quantum of bids in the tap sale, market participants have a consensus that the CBK is likely fore boarding the likelihood of the underperformance of the December bonds.

Investors bid Ksh.19.1 billion for the infrastructure bond (IFB) tap sale which has a coupon rate/yield of 13.938 per cent, of which the CBK accepted the entire sum on the table.

The high acceptance brought total proceeds from the November IFB to Ksh.94.7 billion.

Initially, the infrastructure bond had received bids of Ksh.91.8 billion during its primary sale.