Tight liquidity Leaves Treasury’s October Bonds Undersubscribed

Kenya National Treasury’s plan to raise Ksh 60 billion from Treasury bonds (T-bonds) in October witnessed under-subscriptions attributed to the tight liquidity end of September.

Kenya National Treasury’s plan to raise Ksh 60 billion from Treasury bonds (T-bonds) in October witnessed under-subscriptions attributed to the tight liquidity end of September.

The Central Bank of Kenya received bids worth Ksh 55.5 billion representing a 92.5% performance rate. It accepted Ksh 52 billion following the close of the bonds sale.

The three bonds; FXD1/2013/15, FXD3/2019/15 & FXD1/2021/24 have 6.4, 12.9 and 24.7 years to maturity.

The coupons for the three bonds were; 11.3%, 12.3% and 13.9%, and the weighted average yield for the issues were; 11.9%, 12.8% and 13.8%, for FXD1/2013/15, FXD1/2019/15 and FXD1/2021/25, respectively.

The money raised will be used for budgetary support. 

The government is 59.0% ahead of its prorated borrowing target of Kshs 190.0 bn having borrowed Kshs 301.9 bn of the Kshs 658.5 bn borrowing target for the FY’2021/2022.

What analysts say

“The decline in performance compared to the heavy oversubscriptions in previous issues was attributed to the tight liquidity experienced at the tail end of September,” Genghis Capital.

“In the past weeks, liquidity in the money markets has shrunk on the back of a heavily oversubscribed IFB issue earlier in the month, as well as, aggressive open market operations by CBK,” noted analysts at AIB-AXYS Africa.

“The undersubscription is attributable to tightened liquidity in the market, with the average interbank rates increasing to 6.3%, from 3.3% recorded the first week of September.  Investors preferred the longer-tenure issue i.e. FXD1/2021/25, which received bids worth Kshs 28.7 bn, representing 51.7% of the total bids received,” Cytonn Investments.