Treasury raises Ksh.74 billion from June infrastructure bond

The National Treasury has received Ksh.73.8 billion from the sale of an infrastructure bond this month whose auction ended on Tuesday.

The auction which sought Ksh.75 billion was oversubscribed at 101.8 per cent as investors put in bids of Ksh.76.4 billion for the issue.

The high investor interest is attributable to the bond’s tax free allure which saw June’s bond fully-subscribed to reverse subdued investor demand for government securities across recent weeks.

The high investor appetites were however accompanied by an equivalent demand for greater yields with the weighted average rate of accepted yields standing at a high 13.742 per cent.

The demand for a higher return on the issue nevertheless largely aligns with market expectations with investors attaching a higher risk premium to recent government security issues.

“We expect the issue to be oversubscribed as seen in the recent trend of increased interest in longer-dated papers and the tax-free nature of infrastructure bond (IFB) issues,” noted AIB-AXYS Africa analysts.

“Due to the increased political and pandemic related risks, investors are likely to prefer longer tenors. Similarly, aggressive bidding driven by investors’ increased preference for higher risk-adjusted returns.”

An estimated Ksh.35.3 billion from the bond sale proceeds is to be channeled towards debt redemptions with the balance representing new borrowing.