Treasury raises Ksh.37.8 billion from December bonds

The December bonds featuring reopened 10 and 20-year papers were oversubscribed with investor bids tallying to Ksh.41.2 billion against an initial target of Ksh.40 billion.

Bids were equally matched between the two papers whose time to maturity stands at eight and 16.4 years with the longer dated issue edging subscriptions at Ksh.20.9 billion.

The Central Bank of Kenya (CBK) which represents Treasury’s primary bond issuer, however, rejected expensive bids in line with market expectations to lower the value of accepted bids.

“Due to the increased liquidity in the money market, the bonds are likely to be oversubscribed, However, the government is likely to reject expensive bids as it is currently ahead of its prorated borrowing target,” noted analysts at AIB-AXYS Africa.

Nevertheless, the Exchequer is still facing higher interest payouts on the latest bond issue with the weighted average rate of accepted bids at 12.642 and 13.366 per cent respectively for the 10 and 20 year papers.

In contrast, the CBK was hoping to tame aggressive bidding from investors to keep yields down and in line with the bonds coupon rates of 12.28 and 13.2 per cent.

The high-performance rate for the issue mirrors the continued stay of liquidity in the money markets in spite of CBK’s open market operations which has driven temporary tightness.

According to analysts at AIB-AXYS, recent high acceptance levels amidst expected low bid volumes from tightening liquidity have informed aggressive bidding from investors and the subsequent jump in yields for accepted bids.

The Treasury is expected to resume its local borrowing program through bonds on or before January with the value date for the next issue falling in the New Year.