Treasury raises Ksh.39 billion from April’s Infrastructure bond

The National Treasury has raised Ksh.39 billion from its infrastructure bond sale conducted over the past week.

The nine-year amortized bond attracted investor bids worth Ksh68.4 billion, an excess of the Ksh.60 billion amount on offer as investors continue to favour the safe haven investment amidst volatility created by the coronavirus pandemic.

The Central Bank of Kenya (CBK) however rejected bids amounting to Ksh.29.4 billion as it continued to fight off aggressive bidding from investors in a means to sustain lower interest rates on future pay-outs.

The market weighted average rate for the auction stood at 12.3 per cent against an underlying coupon rate of 10.85 per cent to indicate a rise in the yield curve for government securities on sale and in line with expectations.

“We expect the bond to attract more interest due to its short tenor as well as the tax-free incentive for infrastructure bonds, translating to a higher return,” researchers at Cytonn Investment had reckoned.

The yield on the April infrastructure bond issue lines up to the return of the IFB 1/2017/12Yr issue maturing in February 2029 whose coupon rate was quoted at 12.5 per cent in the secondary market on Wednesday.

The CBK continues to juggle the ball between keeping interesting down by rejecting expensive bids while conscious of the closing window to mobilize revenue for the Treasury through borrowing to the end of June.

According to data from the National Treasury, gross borrowing stood at Ksh.378.4 billion at the end of February against a target of Ksh.514 billion in the government’s fiscal year to June.

New borrowing from the sale amounts to Ksh.19.6 billion with the balance accounting for debt redemptions.