The Central Bank of Kenya (CBK) is seeking to raise KSh50 billion from a tap sale of reopened 6.5 year and 17 year infrastructure bonds (IFB) first issued in 2023.
- According to the prospectus, bidding for the tax free IFs runs to 14th August 2024 and is market determined.
- Notably, the two bonds have remaining terms to maturity of 5.8 years and 15-7 years respectively.
- The IFB/2023/6.5 Yr and IFB/2023/17 Yr have coupons rate of 17-93 percent and 14.39% respectively.
This issuance follows a series of under-subscriptions from the recent CBK sales with the lowest performance being a 2.8 per cent under subscription. The prevailing high rates only raises investor demands for higher real returns considering the perceived high risk involved.
The 6.5 year paper closed its first sale with a weighted average rate of 17.9327%. The issue received bids worth KSh88.9 billion against the KSh50 billion offered, a 177.8 percent oversubscription.
However, CBK accepted KSh67.1 billion, rejecting expensive bids.
The 17 year paper on the other hand, closed its recent sale with a weighted average rate of 14-3999%. The exchequer received bids worth KSh59.8 billion against the KSh50 billion on offer, reflecting a 119.5 per cent oversubscription. The rates were relatively lower on account of a lower 9.50% Central Bank rate in the period.
The CBK, despite missing targets in the last two auctions, is nudging investors towards longer dated papers reversing the over reliance on shorter term papers that investors have been continuously preferring.
The twin reopening has been seen as a move to pull investors towards lending more money to the broke government.
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