Kenya will sell an 11-year, amortised infrastructure bond to raise 70 billion shillings in August.
The Central Bank said the money received will go to the funding of infrastructure projects in the FY2020/21 budget estimates.
In a statement, it would receive bids for the bond until Aug.18, and auction it a day later at 10.900 percent.
The Bond will be tax-free as provided for under the Income Tax Act. Investors will be able to redeem 50 percent of the outstanding principal amounts on 17th August 2026 with final redemption on all outstanding amounts on 11th August 2031.
Only investors with active CDS Accounts with the Central Bank of Kenya are eligible.
The Bond may be re-opened at a future date. Secondary trading in multiples of KSh 50,000.00 will commence on Tuesday, 25th August 2020.
“Borrowing appetite is already apparent, with a bias towards domestic markets. This is a strategic move by the Treasury to take advantage of the current low rates while reducing the foreign exchange risk on its debt portfolio. The recent depreciation of the shilling could see the market value of debt increase as a result of the revaluation.
For now, to ensure minimal liquidity strain, the government is also trying to elongate the maturity profile of local debt and negotiate/restructure, external bilateral funding,” says Faith Atiti and Stephanie Kimani Analysts from NCBA Research.
“The auction is expected to attract considerable investor interest given the favorable risk-return balance and the sound liquidity of the issue.”
In July, the CBK received bids worth KSh 181.8 Billion for the re-opened 5, 10, and 15-year Treasury Bonds.
According to the Capital Markets Authority (CMA) the primary treasury bonds market, during Q2. 2020, Six (6) Treasury bonds were issued to raise KShs. 205.6 Billion but received subscriptions worth KShs. 249.82 Billion.
In the end, however, it accepted bonds worth KShs. 137.35 Billion, indicating a 54.97 percent acceptance rate.