The Central Bank of Kenya (CBK) aims to raise KES 50 billion by reopening three bonds, which include papers with a maturity period of 3, 10, and 15 years in April.
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The government’s financial representative is seeking to collect KES 20 billion by issuing a 10-year bond that was initially put up for auction in 2018.
This security, which still has 5.8 years until it reaches maturity, has an interest rate of 12.502 per cent. The bond will remain available for purchase until April 4th.
Until April 18, the CBK aims to raise KES 30 billion from the sale of both the three-year and 15-year securities.
The three-year bond, which has 2.1 years left until maturity, incurs a higher withholding tax rate of 15% on any interest earned.
The interest paid on other long-term bonds is subject to a 10 per cent tax rate for investors.
The first auction of the short-duration bond took place last year, with a coupon rate of 11.766 per cent. Meanwhile, the 15-year paper, which still has 10.9 years until redemption, has an interest rate of 12.857 per cent.
Long-term bonds, which have recently been auctioned, have coupon rates exceeding 14 per cent as the government aims to raise funds to address its budget deficit.
However, investors are demanding higher rates due to the risks associated with high inflation and a significant depreciation of the local currency.
Due to high inflation purchasing power of the interest earned by fixed-income investors has reduced and the principal paid at the end of the holding period.
Early this week CBK reopened the March infrastructure bond with a tax-free interest rate of 14.39 per cent looking to raise KES 20 billion.
The sale will continue until Friday 17th or until the desired amount is reached on a first-come-first-served basis through applications submitted to the government’s fiscal agent.
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