The Treasury raised Ksh 38.5 billion against a target of KSh40 billion in its two- and 15-year bonds on Wednesday auction for budgetary support.
According to economists, the 2-year and 15-year results came within market expectations with the average for the 2-year falling at 10.701% while that of the 15-year came in at 12.857%.
Cytonn Investments also expected similar auction results, “Treasury bonds with the same tenor (2.0-years and 15.0-years) are currently trading at a yield of 10.7% and 12.6% respectively. We expect bids to come in at between 10.7% – 10.9% and 12.6% – 12.8% for the 2-year and 15-year bonds, respectively.”
CBA Analysts observed that with liquidity remaining high and preference for government securities by commercial banks intact, “Appetite for the fifteen-year paper (FXD1/2019/15) will be relatively low with yields expected to come in between 12.50% – 12.70%.”
“However, the subscriptions caught the market unawares with total subscriptions hitting Ksh 101Bn. The 2-year received bids worth Ksh76Bn but accepted Ksh 23.7Bn while the 15-year received bids worth Ksh 14.7Bn with Ksh 11.8Bn accepted,” Genghis Capital said.
They project an increased activity for the rest of the week with demand on infrastructure bonds still high from off-shore investors.
“While the need to fund the government’s over Ksh 200Bn domestic debt shortfall could see the increased issue of shorter papers, the need to lengthen the average public debt tenor amidst rising liquidity concerns for the country could see some caution on this front,” according to CBA.
Treasury has so far absorbed Ksh 72.43Bn from the domestic debt market, a meager 23.34% of its target. “That said, we continue to hold that the current ample liquidity conditions could support higher debt absorption in coming weeks, although investors will remain duration sensitive with preference on the short end.”