Kenya’s Treasury Issues Sh20 Billion Bond to Boost Finances
The Treasury is back in the local debt market and aims to raise Sh20 billion with a three-year bond.
The government hopes to encourage investors who have been hesitant to provide long-term funds due to interest rate uncertainties.
The Central Bank of Kenya (CBK) has revealed that the interest rate for the bond will be determined by the market, according to the prospectus published on Thursday.
Investors will be closely monitoring the interest rate on accepted bids to gauge whether the Treasury’s funding challenges will cause the Central Bank of Kenya to ease its position on costly bids in bond auctions.
In the most recent bond sale, which involved a reopening of a 15-year bond and a three-year bond, only Sh1.76 billion was raised out of the total Sh30 billion sought.
The longer-term bond was cancelled, and all the funds were raised through the three-year bond.
According to analysts, the cancellation of the longer-term bond in the previous sale was not due to a lack of interest from investors, but rather because the government viewed the aggressive investor bids as unsustainable.
Although there is tight liquidity in the market, the Treasury will be looking for better results in the current bond sale, which runs until May 9th.
However, if the government wants to attract investors, it may need to offer higher returns.
In the previous bond sale, the three-year tranche received bids averaging 13.89 percent interest, while the printed coupon was 11.77 percent, and the average yield on accepted bids was 13.47 percent.
The interest rates offered in previous bond issuances have given the Central Bank of Kenya and the Treasury an idea of the returns investors are demanding to lend money to the government for a three-year period.
In recent bond sales, the Central Bank of Kenya has been unable to meet the borrowing targets, which analysts attribute to interest rate concerns. Instead, the bank has been investing funds in the 91-day Treasury bill as it waits for the uncertainty to subside.
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Kenya’s Treasury Issues Sh20 Billion Bond to Boost Finances