CBK seeks to switch T-bill investors to bonds in Covid-19 led pressure
The Central Bank of Kenya (CBK) has sought to switch Treasury bill (T-bill) investors to bonds with a view to provide relief to exchequer upcoming redemption’s on local debt.
The desired switch has been pinned on its June infrastructure bond issue whose eligibility has been specified to holders of a one-year T-bill maturing on June 1.
The reserve bank aims to lure the investors of the bond to rollover their investment in the T-bill to the six-year amortized bond which carries a tax-free tag.
The bond whose sale runs between May 14 and May 26 aims to raise Ksh.25.6 billion and has a value date equivalent to the maturity of the one-year paper tagged 2236/364 which raised Ksh.23.5 billion in proceeds.
George Bodo a Director at Callstreet Research and Analytics termed the issue as a special sale borne by the Covid-19 pandemic which has seen the government mull a restructure to part of its domestic debt.
“As an investor you have two options. You can decide to roll over or make the call to have your proceeds placed in the new bond,” he reckoned.
The National Treasury and the CBK have long favoured investments in bonds over T-bills in view to stretch the tenor and maturity of local debt who holders include commercial banks and pension funds.
The desired restructure comes on the back of proposals by The Actuarial Society of Kenya (TASK) to freeze interest payments on pension assets invested in government securities for up to two years in a means to provide relief to the exchequer.
The government is presently facing debt-refinancing pressures from a hit to its revenue base from the economic slowdown resulting from the Covid-19 pandemic as mirrored in the downgrade of its outlook as a future debt issuer by Moody’s Investor Service last week.
Earlier in the week, the International Monetary Fund (IMF) raised the country’s debt distress from moderate to high on the back of the expected revenue shortfall and higher expenditures.
Three commercial banks including KCB, Equity and Cooperative meanwhile saw their Moody’s outlook reclassified to negative from stable from their large holdings of government debt to further signify the observed pressure on the exchequer.
The June bond is expected to sell alongside the re-opened five-year May issue which targets to raise Ksh.30 billion having first raised Ksh.20.8 billion in late April.