The National Treasury missed its target of raising Ksh.60 billion from the domestic debt market in May only managing Ksh.31.7 billion.
Investor bids on the new 10-year paper (FXD1/2022/10) and the re-opened 25-year bond (FXD1/2021/25) which traded between April 28 and May 10 was Ksh.43.1 billion.
This was equivalent to a 71.9 per cent subscription rate.
The 10-year paper received bids of Ksh.32.9 billion in contrast to Ksh.10.2 billion
Average yields on accepted bids on the shorter-dated 10-year paper stood at 13.49 per cent while returns on the longer issue stood at 13.976 higher than the paper’s coupon rates.
“This means that investors would prefer to bid or purchase bonds of the shorter term to maturities on a risk versus return basis. This could mean that if the CBK intends to maintain its strategy of lengthening the Average Term to maturity of public debt, it will face pressure to begin accepting investor bids above 14%,” according to Sterling Capital Primary Auction Results Update Note.
“Alternatively, the CBK could issue new or re-open bonds with tenors till maturity of between 10 and 15 years.”
The government was at 1.9 per cent ahead of its prorated borrowing target of Kshs 572.6 billion having borrowed Kshs 583.3 billion of the Kshs 661.6 billion borrowing targets for the FY’2021/2022 as of May 6, 2022.