Treasury raises Ksh.64b from local borrowing in September

The National Treasury has raised Ksh.64.2 billion from local borrowing in September as it continues to profit from the high investor appetite for government securities.

Total bids received from the sale of the three re-opened bonds conducted by the Central Bank of Kenya (CBK) totalled to Ksh.81.7 billion against a target of Ksh.50 billion.

The longer tenured 15-year bond maturing in May 2035 received the highest bids which totalled to Ksh.49.8 billion against combined bids of Ksh.31.8 billion for the short-tenured papers.

The high subscription rate to the paper pushed yields downwards as the market weighted average rate settled at 12.53 per cent against an advertised coupon rate of 12.75 per cent.

Further, investors have begun switching to long-term bond issues against the uncertainty posed by the current market environment as yields on shorter maturing debt issues fall.

The lower yields have for instance seen investors staying off the weekly traded Treasury bills (T-Bills) which remain under subscribed over the last two weeks.

Treasury is set to continue enjoying easy pickings from local borrowing which is boosted in part by high liquidity in the money markets.

In its draft Budget Review and Outlook Paper (BROP) published last week, the Treasury indicated it sought to raise the ceiling for local borrowing from a net sum of Ksh.494.3 billion to Ksh.554.6 billion across the 2020/21 financial year to June.

Excessive local borrowing is however seen as detrimental to private sector credit access from banks as lenders shun on lending to riskier segments.

Private sector credit growth in July for instance remained relatively unchanged at 7.9 per cent having fallen from a high of 9 per cent in April this year.

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