Central Bank of Kenya (CBK) has announced the issue of new three-year and re-opened five-year fixed coupon treasury bonds whose tap sale will remain open until 10th January 2024.
- According to the CBK prospectus, the coupon rate for the three-year treasury bond will be market-determined while that of the five-year treasury bond is pegged at 16.844%. The purpose of the tap sale is to raise cash for budgetary support.
- The redemption date for the 3-year treasury bond is 11th January 2027 while that of the 5-year bond is 10th July 2028.
- The placing agents include commercial banks, non-bank financial institutions, licensed stock brokers, and investment advisors.
CBK said competitive bids will have a minimum of KSh 2 million while non-competitive bids will have a maximum bid amount of KSh 20 Million.
Treasury bond bids must be submitted to the CBK electronically via CBK Dhow CSD or Treasury Mobile Direct by 10.00 am on Wednesday 10th January 2024. The auction date is 10th January 2024 while payment by successful bidders can be obtained from CBK Dhow CSD Investor Portal/App on Friday 12th January 2024.
- Licensed placing agents will be paid a commission at the rate of 0.15% of actual sales (at cost) net of 5% withholding tax.
- The CBK will rediscount the bonds as a last resort at 3% above the prevailing market yield or coupon rate whichever is higher.
- The bonds qualify for statutory liquidity ratio requirements for Commercial Banks and Non-bank Financial Institutions as stipulated in the Banking Act CAP 488 of the Laws of Kenya.
The bonds will be listed on the NSE with Secondary trading in multiples of KSh50,000.00 to commence on Monday, 15th January 2024.
During the Treasury bond tap sale of December 5th, 2023, the 6.5-year infrastructure bonds received bids totaling KSh 47.2 billion against an advertised amount of KSh 25 billion, an oversubscription rate of 188.8%.
Spot market treasury bills were undersubscribed with a performance rate of 72.26% from 156.90% recorded in the prior week. Demand remained skewed to the shorter-term 91-day paper – which posted an oversubscription of 345%.
CBK acceptance rate increased to 98.51% of the total bids received – accepting up to KSh 17.09 billion. However, outsized maturing repayments amounting to KSh 23.43 billion resulted in a net repayment for the third consecutive week.
- The market average rate on the 364-day paper soared firmly above the 16.00% mark – following the Monetary Policy Committee’s move to raise the benchmark rate by 200bps to 12.50% in their December 2023 meeting.
- The accepted average yields on all the papers remain firmly above 15.50% with the 91, 182, and 364-day papers climbing 13.58bps, 17.32bps, and 3.93bps, respectively.
- Term spreads in the spot market remain within 20bps – magnifying the possibility of a yield curve inversion on the short end.
ALSO READ: CBK Seeks KSh 25bn in Dec. Infrastructure Bond Tap Sale
