The Central Bank of Kenya (CBK) has raised a further KSh32.02 billion from the tap sale of the August Infrastructure bond reopened last week.
- The paper received bids worth KSh35.2 billion against the KSh15 billion offered – a 234.6 per cent oversubscription.
- The apex bank however accepted 91.4 per cent of the bids received, locking in KSh32.02 billion.
- The weighted average yield of accepted bids came in at 17.73 per cent with the coupon rate stalling at 14.39 per cent. With the current inflation rate, the real yield for the paper is 13.4 per cent.
The 17 year paper was undersubscribed in the August reopening, receiving bids worth KSh29.5 billion against the KSh50 billion offered – a 58.9 per cent subscription rate. The underperformance prompted CBK to issue a tapsale to try to meet its initial capital target.
Treasury Bills Oversubscribed, “End of Higher for Longer”
In the weekly T-bills auction, investors continuously preferred the short term 91- day paper receiving bids worth KSh16.95 billion against the KSh4 billion on offer – a 437.4 per cent oversubscription.
Both the 182-day and 364-day papers remained undersubscribed, receiving bids worth KSh4.4 billion and KSh2.2 billion – 44.5 per cent and 22.5 per cent subscription rates respectively.
The CBK received bids worth KSh24.2 billion for the 3 papers against the KSh24 billion on offer – a 100.8 per cent oversubscription. The government accepted 97.7 per cent of the total bids received.
Yields on all the three papers saw decreases on the back of CBK’s decision to lower rates by 25 basis points to 12.75 per cent earlier this month after maintaining rates at the highest since 2012. The easing of the benchmark rate was prompted by the easing inflation below the midpoint and the stronger shilling offering relief for bank borrowers.
With diminishing “higher for longer” stances, investors are rushing to lock in higher rates to maximize their real returns. With the government looking to tap additional external funding, this puts pressure on the domestic market by lowering demand for cash by the government from the domestic market.
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