Treasury Mulls Raising Ksh 75 Bn from Domestic Market in January

CBK Says July 2020 Treasury Bonds Auction Oversubscribed by 302.95%

Treasury Cabinet Secretary Ukur Yattani

The National Treasury eyes more money from the domestic market for budgetary support besides soaring debts before the year ends. 

The government is seeking to raise an additional  Ksh 22.00 billion in December December via a Tap Sale on recently auctioned papers, FXD1/2012/15 and FXD2/2019/15. 

The Tap sale is scheduled to end on 23rd December 2020.

On the other hand, National Treasury will be seeking to raise Ksh 75.00 billion in its January 2021 T-bond auction. This will be via two new issues: FXD1/2021/2 and IFB1/2021/16 seeking to raise Ksh 25.00Bn and Ksh 50.00Bn respectively. 

The auctions will be held on 06th and 20th January 2021 respectively.

“The papers are likely to attract considerable investor interest given the favourable tenors coupled with the IFB’s tax-free allure. That said, given the anticipated moderate liquidity squeeze into the new year, the papers could attract a hefty premium buttressing expectations of higher interest rates,” says NCBA Market Analysts.

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“Fundraising in the local market has largely been successful, more so on longer term papers. Investor subscription has remained healthy backed by limited alternative investment options. Moreover, a steady upward adjustment of the yield curve has made Treasury auctions attractive. To be sure, T-bill yields have risen by an average 40.00bps while yields on bonds have on average traded 30bps above their prevailing market rates since the start of the FY2020/21.

With the cost of debt financing rising, debt sustainability concerns remain a key sticky point for the government. This may largely explain the decision to revert taxes to pre-COVID levels at the start of January 2021 in a bid to manage the growing revenue deficit,”  NCBA on challenges in plugging the revenue gap to result in a return of pre-COVID tax rates in 2021.