The Central Bank of Kenya (CBK) has floated a KSh 70 billion, 8.5-year amortized infrastructure bond earmarked for funding budgeted infrastructure projects in the 2023/24 financial year.
- The CBK appears to be tilting towards longer-duration bonds as it seeks to test overall investor sentiment.
- The CBK prospectus shows that the Bond has been on sale since 24th January 2024 and ends on 14th February 2024 while the payment date is 19th February 2024.
- Analysts at AIB-AXYS Africa, in a primary bond auction note, said they expect the yield curve to begin flattening as investors price-in risk premia at the medium section of the curve.
The weighted average tenor to maturity of the Infrastructure Treasury Bonds series stands at 10.23 years.
Further, the government has approximately KSh 280.93 billion worth of Treasury Bills and coupon and principal bullet repayments due in February 2024. Observers estimate that a significant portion of this auction’s proceeds will be allocated towards refinancing upcoming maturities.
There is also an expectation that the auction on this paper, which happens on February 14th 2024, will be broadly oversubscribed driven largely by foreign investor rush to lock in attractive frontier market yields.
Investors have been advised to bid at this auction at between 18.95% and 19.15%, due to the prevailing macro-economic conditions.
According to the CBK prospectus, the Bond will be listed at the NSE and will commence secondary trading in multiples of KSh 50,000 on 19th February 2024.
The redemption date, according to the CBK, will be 9th August 2032. The redemption structure is 20% amortization of the outstanding principal amount on 15 February 2027, 30% on 11th February 2030, and 100% final redemption of all outstanding amounts on 9th August 2032.
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