Central Bank cancels Sh30bn bond action

The Central Bank of Kenya on Thursday cancelled the auction of a Sh30 billion treasury bond.

The bank re-opened the 15 year bond last week in an effort of assisting the National Treasury close the budget deficit.

The CBK did not give a reason for the cancellation.

Analysts however reckon the tight money market could have resulted in a mix of low bids and high rate demands that made the bond sale untenable.

The Treasury has increasingly been turning to the domestic market to raise funds.

The cancellation of the auction comes barely a month after the central bank cancelled the auction of the 364-day Treasury bill.

Treasury’s budget deficit stands at Sh516 billion in the current financial year.

The cancellation opens up a window where the treasury may explore the idea of foreign debt to offer budgetary support.

The treasury is toying with the idea of raising $1.5 billion (Sh156 billion through a syndicated loan.

The money is expected to ease budgetary pressures exerted by the general election in August, ongoing infrastructure projects as well as food imports and other drought mitigation efforts.

Treasury data as of December shows that Sh156.3 billion had been borrowed from the domestic market.

During the same period Kenya Revenue Authority (KRA) collections hit Sh591 billion.

KRA has a Sh1.332 trillion target by the end of the 2016/17 financial year.

The central bank has been mopping up dollars in the exchange market hoping to ease pressure on the shilling.

By the close of trading on Thursday, the shilling was trading at Sh103.90/104.10 to the dollar.

The budget deficit has risen by 9.6 percent of gross domestic product, from 7.2 per cent in the 2015/16 financial year.

Treasury has a target to raise Sh334.7 billion internationally and Sh225.5 billion from the domestic market.