The Central Bank of Kenya rejected bids worth Ksh 22.5 billion for its re-opened bonds FXD1/2021/05, FXD1/2020/15 and FXD1/2021/25 in March.
The bonds subscription rate was at 81.9% due to the tightened liquidity in the money markets during the bonds’ sale period.
The interbank rate averaged 5.6%, in comparison to an average rate of 4.7% in February 2022.
The CBK had planned to raise Ksh 50 billion for budgetary support in the current fiscal year. It received bids worth Kshs 40.9 billion and accepted bids worth Kshs 18.5 billion, translating to a 45.1% acceptance rate.
Investors preferred the longer-tenure issue; FXD1/2021/25, which received bids worth Kshs 22.6 billion, representing 55.2% of the bids received due to its higher returns of 14.0% compared to the 13.7% and 12.0% returns offered by FXD1/2020/15 and FXD1/2021/25, respectively.
“The low acceptance rate for the bonds (can be) attributed to investors demanding a higher premium to compensate for duration risks and expected inflationary pressures following the continued rise in global fuel prices,” Cytonn Investments Analysts explained.
The coupons for the three bonds were 11.3%, 12.8% and 13.9% for FXD1/2021/05, FXD1/2020/15 and FXD1/2021/25, respectively.
The weighted average yield was 12.0%, 13.7%, and 14.0% for FXD1/2021/05, FXD1/2020/15 and FXD1/2021/25, respectively.
The government is 11.6% ahead of its prorated borrowing target of Kshs 468.5 billion having borrowed Kshs 523.1 billion of the Kshs 658.5 billion borrowing targets for the FY’2021/2022.
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