Kenya’s National Treasury raised KSh37.8 billion in its re-opened two bonds, FXD4/2019/10 and FXD1/2018/20 for budgetary support.
The Central Bank of Kenya on behalf of the treasury had sought Ksh 40 billion, with investors offering KSh41.2 billion a 102.9 per cent subscription rate with the CBK accepting bids worth Ksh.37.8 billion. KSh20.3 billion came from the reopened 10-year paper first sold in 2019, while the 20-year, 2018 reopening accounted for KSh17.5 billion.
“The auction results signal an upward shift in the yield curve, particularly on the medium-term tenor which stood at 12.3988 per cent as of 3rd December 2021. For the 20-year, we do not see any significant change on the yield curve as the tenor remained flat at 13.3696 per cent,” Sterling Capital Analysts state.
“Overall, the yield curve has shifted upwards with average yields higher in 2021 compared to the same period in 2020. This trend is largely attributable to an increase in budget fiscal deficit financing.”
Rates in the fixed income market have remained relatively stable due to the tightened but sufficient levels of liquidity in the money markets.
At the end of November, the government was 16.6 per cent ahead of its prorated borrowing target of Kshs 291.3 billion having borrowed Kshs 339.5 billion of the Kshs 658.5 billion borrowing targets for the FY’2021/2022.
“We expect a gradual economic recovery going into FY’2021/2022 as evidenced by Kenya Revenue Authority (KRA) collection of Kshs 598.5 billion in revenues during the first four months of the current fiscal year, which is equivalent to 101.1% of the prorated revenue collection target. However, despite the projected high budget deficit of 7.5 per cent and the lower credit rating from S&P Global to ‘B’ from ‘B+’, we believe that the support from the IMF and World Bank will mean that the interest rate environment will remain stable since the government is not desperate for cash,” Cytonn Investments state.
