Treasury Targets KSh30bn in May 5-year Bond Tap Issue

The Central Bank of Kenya (CBK) which represents the exchequer’s primary debt auctioneer has listed two bonds- a re-opened 15 year issue and a new 25 year bond.

Kenya National Treasury building

Kenya’s National Treasury has reopened its May 5-year bond issue to a tap sale seeking to raise an additional KSh30 billion from the domestic market for budgetary support.

The bond has a fixed coupon rate of 11.667 percent and set to mature in May 2025.

“The anticipated TAP Sale on this month’s primary bond issue will also dampen fixed-rate bonds’ activity. As such, we see opportunities within the infrastructure bond segment,” says Genghis Capital,

The initial sale last month raised KSh 20.78 billion after bids worth KSh 34.53 billion were received against an advertised amount of KSh 50 billion

“We expect appetite in this re-opened paper, in particular from the investors who missed out in the initial primary listing. However, in light of recent fiscal developments, we expect investors to price in slightly higher premium as compared to the primary listing. Overall, our sentiment is that the weighted average accepted rate for FXD1/2020/5 will be 11.65 percent – 11.75 percent,” Genghis Capital state.

“The bond which would in the last few months have attracted significant appetite from a market keen on lowering the average maturity of their portfolios especially banks was grossly undersubscribed,” NCBA Research Team said in their commentary.

According to NCBA, investors’ bidding behavior is gradually reflecting increased demand for a higher risk premium to compensate for uncertainty.