Treasury Reopens Three Long-term Bonds in Ksh 30 Bn Sale in January

Results for Re-Opened Ten & Twenty-Year Treasury Bonds Issue Nos. FXD2/2018/10 & FXD1/2021/20 dated 24 January 2022

The Central Bank of Kenya (CBK), invites bids for the January bond prospectus that is reopening 5-year, 10-year and 20-year bonds sold in 2020, 2018 and 2021 respectively with 3.4, 7.0 and 19.7 years maturity.

The CBK on behalf of the National Treasury seeks to raise Ksh 30 billion for budgetary support.

The CBK said that the 20-year paper (FXD1/2021/20) will carry a coupon of 13.444 per cent, the 5-year (FXD1/2020/05) has a coupon of 11.667 per cent and the 10-year (FXD2/2018/10), at 12.502 per cent.

“Duly completed bond application forms must be submitted to any branch of the Central Bank in the specified tender box or via Treasury Mobile Direct or CBK internet Banking by 2.00 p.m on Tuesday, 4th January 2022 and 18th January 2022 for FXD1/2020/05 and FXD2/2018/10 & FXD1/2021/20 respectively,” the CBK says in the prospectus.

The bonds have been classified as benchmark bonds. The benchmark bonds programme in Kenya was mooted in 2007 with the identification and adoption of benchmark tenors of 2, 5, 10, 15, 20 and 25 years along the yield curve.

The aim of the programme was to improve bond market liquidity and achieve a benchmark yield curve by minimizing bond market fragmentation.

“We expect investors to prefer the longer-dated paper, FXD1/2021/20, as they search for higher yields. The bonds are currently trading in the secondary market at yields of 10.8%, 12.2% and 13.3%, for FXD1/2020/5, FXD2/2018/10 and FXD1/2021/20, respectively, and as such, our recommended bidding range for the three bonds is: 10.6%-11.0% for FXD1/2020/5, 12.0%-12.4% for FXD2/2018/10 and 13.1%-13.5% for FXD1/2021/20 within which bonds of a similar tenor are trading at,” Cytonn Investments state.

Market Analysts observe that rates in the fixed income market have remained relatively stable due to the tightened but sufficient levels of liquidity in the money markets. 

The government has set a net borrowing target of KSh616.80 billion from the domestic market in the current fiscal year ending June 2022 and had borrowed KSh311.17 billion as of December 10.

The government is 20.7 per cent ahead of its prorated borrowing target of Kshs 316.6 billion having borrowed Kshs 382.1 billion of the Kshs 658.5 billion borrowing targets for the FY’2021/2022.

“At the same time, enhanced tax collection in December could also bolster the government’s cash flows reducing borrowing pressure in the domestic market. This could somewhat mute the pressure on the yield curve, although tight liquidity conditions over the next few days could limit the upside from the said developments. Yields have continued to gradually rise as expectations around government borrowing firmed,” NCBA Market Research note.

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