The CBK is seeking KSh 30 billion in the September auction earmarked for budgetary support from two reopened bonds, as the state moves towards a preference for longer dated papers.
- The 10 year and 20 year reopened papers have a remaining tenor to maturity of 9.5 years and 12 years respectively with the interest or discount subject to a 10 percent withholding tax.
- According to the prospectus, bidding for the bond runs to 18th September 2024
- The 10 year paper was first issued in March 2024 receiving bids worth KSh 23.9 billion against the KSh 40 billion offered – a 59.7 percent under subscription.
Investors asked for 17.79 percent but CBK averaged 16.52 percent, taking up only KSh 4.8 billion from the sale. This followed a reopening in April, mopping up KSh 11.8 billion out of the KSh 25 billion offered. In May 2024, the FXD1/2024/010 was reopened through a tap sale, seeking an extra KSh 15 billion, which remained undersubscribed, attracting bids worth KSh 7 billion. The bond has collectively garnered KSh 34.7 billion at the primary sale and subsequent reopening and tap sale. The 20-year paper was first issued in September 2016 with the government seeking KSh 25 billion for budgetary support.
The bonds will be listed on the NSE’s secondary market, trading in multiples of KSh50,000 to commence on Monday, 23rd September 2024.
The government has been taking up on longer dated papers in a bid to lengthen the debt maturity period. Investors reliance on shorter term papers that they have been continuously preferring to hedge against duration risk is likely to see a slowdown. The 10-year paper marked the first longer dated issuance in 2024 when it was first offered in March.
Yields on treasuries have been decreasing mildly on the back of CBK’s decision to lower rates by 25 basis points to 12.75 per cent earlier this month after maintaining rates at the highest since 2012.
The easing of the benchmark rate was prompted by the easing inflation below the midpoint and the stronger shilling offering relief for bank borrowers.
