Central Bank of Kenya (CBK), the state’s fiscal agent, has invited bids for the sale of re-opened 10 year and 20-year Fixed-Coupon Treasury Bonds, that were first sold in 2019 and 2018 respectively.
CBK seeks to raise KSh 40 Billion in the December 2021 T-Bonds Sale, with the proceeds to be used for the Government’s Budgetary Support.
According to the CBK prospectus, the coupon rate for the 10-year Treasury Bond is 12.280% per annum while that for the 20-year Treasury Bond is 13.200% per annum.
The period of tap sale, which began this Monday 22nd November 2021 ends on 7th December 2021 with a value date of 13th December 2021. The discount/ interest paid for these two T-Bonds is subject to withholding tax at a rate of 10%.
Bids closure is 7th December 2021 with an Auction date on 8th December 2021 with results to be announced on December 9th. The CBK will rediscount the bonds as a last resort at 3% above the prevailing market yield or coupon rate, whichever is higher, upon written confirmation from the Nairobi Securities Exchange(NSE).
The Bonds will be listed at the NSE with secondary trading in multiples of KSh 50,000 to commence on December 15th 2021.
Last week, the secondary bond market had the value of bonds traded decreased by 39.55% to KSh 11.13 Billion from KSh 18.65 Bn recorded the week prior. Analysts attributed the reduction in secondary activity to investors’ anticipation of an attractive primary bond issue in December.
Expectations are that activity in the secondary bond market will pick up now that the December primary issue has been done. Investors will be hunting for higher yields and attractive entry points on specific government papers.
Continued borrowing by the government is likely to exert upward pressure on the yield curve.