Tight Liquidity Leaves August Treasury Bonds Undersubscribed

Dr Patrick Njoroge, CBK Governor Displaying some of the new currency Notes

Central Bank of Kenya’s (CBK) re-opened August Treasury bonds sale fell KSh11.5 billion below target. 

The bonds, FXD1/2022/03, FXD2/2019/10 and FXD1/2021/20, sought to raise Ksh 50 billion for budgetary support, but the total bids received amounted to Ksh 49.1 billion, equivalent to a 98.3% subscription rate.

The CBK accepted KSh38.5 billion.

“We attribute the undersubscription to a continued focus on short-term government paper such as the 91-day T-bill, as investors strive to avoid mark-to-market losses brought about by holding longer-term debt issues as has become prevalent in the current rising interest rate environment,” Sterling Capital Limited notes.

At the close of the auction, AIB AXYS Africa analysts had expected an under subscription largely due to tightening liquidity in the money markets and uncertainty in the elections. “We suspect most banks have slowed taking up government debt due to rising yields and private credit sector showing signs of recovery.”

Subsequently, NCBA Market Research collaborates with the sentiments noting that the sovereign’s preference for local borrowing will therefore remain, and yields should continue to adjust higher in tandem.

However, low demand for government securities has helped contain aggressive bidding on auctioned papers.



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