Treasury Plans to Raise KSh 50 Billion from March Bond Sale

The National Treasury missed its target of raising Ksh.60 billion from the domestic debt market in May only managing Ksh.31.7 billion.

Kenya’s National Treasury plans to raise Ksh 50 billion in March with the sale of reopened five-year (FXD1/2021/05), 15-year (FXD1/2020/15) and 25-year bonds (FXD1/2021/25) for budgetary support. 

The FXD1/2021/05 with 4.7 years maturity has a fixed interest rate or coupon of 11.277 per cent while FXD1/2020/15 with 12.9 years to redemption has a fixed rate of 12.756 per cent.

The longest-dated FXD1/2021/25 with 24.2 years to maturity has a coupon of 13.924 per cent. 

Investors will need a minimum of KSh50,000 to bid for one of the bonds.  The sale period closes on March 8.

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

The February infrastructure bond targeted to raise KSh75 billion but received bids of KSh132.26 billion. The CBK took KSh106.75 billion at fixed interest rates of 12.96 per cent.

“Government debt continues to present a compelling investment case for both “Buy and hold” or active bond trading strategies considering subdued equity prices,
rising inflationary and limited low risk high yielding investment options available,” according to Sterling Capital Limited Analysts.

“We expect investors to prefer the longer-dated paper, FXD1/2021/25, in search of higher yields.

The bonds are currently trading in the secondary market at yields of 11.6%, 13.0% and 13.7%, for FXD1/2021/05, FXD1/2020/15 and FXD1/2021/25, respectively, and as such, our recommended bidding range for the three bonds is 11.4%-11.8% for FXD1/2021/05, 12.8%-13.2% for FXD1/2020/15 and 13.5%-13.9% for FXD1/2021/25 within which range bonds of a similar tenor are trading at,” According to Cytonn Investment Analysis.

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