Treasury, through its fiscal agent-the Central Bank of Kenya, accepted bids worth KSh 20.693 Billion at the May Treasury Bonds tap sale, where it offered for sale the 15-year and 25-year bonds.
While the Government was seeking KSh 20 Billion at the sale, the Government’s fiscal agent received bids worth KSh 20.994 Billion.
This was made of bids worth KSh 15.7Billion from the 15-year Treasury Bonds and KSh 5Billion for the 25-year Treasury Bonds.
What CBK offered for the Treasury Bonds
The Coupon rate for the 15 year Treasury notes was 12.734%, while the 25-year Treasury notes had a coupon rate of 13.924%.
The Government offered eligible investors an opportunity to participate in a Tap Sale of this Fixed coupon Government paper whose details were in the prospectus issued on 10th May 2021.
The May Tap Sale was offered on a first-come-first-served basis, with the period of sale to run from 11th May 2021 to 19th May 2021 or upon attainment of the required amounts, whichever comes first.
The tap sale in this month’s Treasury Notes issue was oversubscribed, with the Government hitting its target, backed by increased liquidity in the market.
Treasury rolled out the tap sale to cover the deficit on the two bonds issued earlier in the month, which raised KSh20.29 billion out of a targeted KSh30 billion.
Investors offered Sh42.59 billion for the two Treasury bonds in this month’s auction, marking a marginal over-subscription.
The Government had placed on the auction reopened 15-year and new 25-year bonds, which recorded subscription of up to KSh42.59 billion – at KSh11.58 billion and Sh31 billion, respectively.
Despite the oversubscription, the CBK rejected bids which they deemed aggressive, taking up only KSh20.29 billion.
Analysts at Sterling Capital attribute the 104.5% oversubscription of this latest tap sale to the small size of the issue and the high liquidity in the market.
“The tap sale was fully underwritten due to the high liquidity of the market and the relatively small size of the offering,” said Sterling Capital in its tap-sale results update.
The investment bank said liquidity has improved in recent weeks, with the interbank rate declining to 4.7% on 12th May 2021 from 6.5% on 4th January 2021, while the repo rate has dropped to 5.5% compared to 6.8% at the beginning of January.
Total debt service in May 2021 is KSh.110.3Billion, comprising KSh95.4Billion in T-Bills and KSh.14.9Billlion in coupon payments with no T-Bond maturities.
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