Treasury Re-opens 20 Year and 25 Year Bonds Seeking Ksh 50 Billion 

Liquidity conditions could tighten this week with a KES 35Bn net outflow primarily towards bond settlement.

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Kenya’s National Treasury is back in the domestic market with two re-opened bonds seeking to raise Ksh 50 billion for October.

The two bonds- a 20-year issue with 10.6 years to maturity and a 25-year issue maturing in 22.7 years will be sold to investors between now and October 13.

According to the Central Bank, completed bond application forms must be submitted to any of their branches in the specified tender box or via Treasury Mobile Direct (TMD) or CBK internet Banking by 2.00 p.m on Tuesday, 13th October 2020.

The bonds will be auctioned a day later. 

“The Central Bank will rediscount the bonds as a last resort at 3% above the prevailing market yield or coupon rate whichever is higher, upon written confirmation to do so from the Nairobi Securities Exchange.”

The Bonds may be re-opened at a future date.

“This month’s primary bond issue is coming on the backdrop of maturing FXD2/2010/10 which has an outstanding amount of Ksh 33.39 billion. This implies that although the primary bond prospectus has stated the bond proceeds are intended for budget support, there is a higher likelihood that the proceeds of the bond will partly retire the maturing bond. This, we add, is at odds with the proceeds of domestic financing fully intended for developmental projects. It is instructive to note that National Assembly had requested National Treasury to furnish the list of beneficiary projects from domestic financing sources; such a list has not been published nor publicized,” says Churchill Ogut, Analyst, Genghis Capital.

In August, Treasury raised Ksh 64 billion from the local debt market after bids hit Ksh 81.7 billion against a target of Ksh 50 billion.

Cytonn Investments says, “Rates in the fixed income market has remained relatively stable due to the high liquidity in the money markets, coupled with the discipline by the Central Bank as they reject expensive bids. The government is 79.2% ahead of its prorated borrowing target of Kshs 121.6 billion having borrowed Kshs 217.9 billion.”