The Central Bank of Kenya(CBK) is looking to raise KSh 30.00Bn for budgetary support in the second Treasury Bonds Auction of January 2022.
The Auction will see the reopening of two bonds, the 10 year Treasury Bonds that were first sold in 2018 and a 20 year Treasury Bonds that were first sold last year.
CBK offer to investors
The bonds will attract a coupon rate of 12.50% and 13.44% respectively with an
effective tenor of 7.0 years and 19.7 years.
According to a fixed income note from AIB-AXYS Africa Research, the first weeks of January has seen liquidity in the money markets eased, driven by government payments which out weighed open market operations by CBK.
“We expect the bonds to be oversubscribed as seen in the recent trend of higher interest in
longer dated papers. Due to the increased political and pandemic related risks investors are
likely to consider tenors higher than treasury bills,” said the AIB-AXYS Africa note.
However, the government is likely to reject expensive bids as it is currently 14.13% ahead of its prorated borrowing target having a net borrowing position of KSh 379.07Billion in the 2021/22 financial year.
The firm said recent high acceptance levels on bond application coupled with expected low bid volume shows an aggressive tone should be adopted in application. It is thus advising investors to bid within the range of 12.34% – 12.59% for the 10 year and 20 year T Bonds that are on offer, in an auction that take place this Teusday 18th January 2022.
Secondary trading of these benchmark bonds, that will be listed at the Nairobi Securities Exchange, will begin on January 25th 2022.
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 to do so from the NSE.
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