National Treasury of Kenya Floats KES60bn Bond 

The National Treasury has met 17.40% of its net domestic target for the FY2022/23 compared to 39.10% at the same time in the FY2021/22.

The Kenya National Treasury Building. Switch auction involves a transaction that exchanges securities held by investors with selected bonds.

The National Treasury of Kenya has floated a new bond targeting KES 60 billion for budgetary support under its 2022/2023 domestic borrowing program.

The Central Bank of Kenya (CBK)—the government’s fiscal agent—said the bonds consist of two reopened papers – 10-year and 15-year bonds first sold in 2017 and 2020 respectively, seeking KES 40 billion— and a new 25-five-year paper targeting KES 20 billion.

The reopened 10 and 15-year papers, have 4.9 years and 12.3 years to maturity respectively, offering interest at 12.97 per cent and 12.76 per cent.

The period of sale for the bonds runs from 21st September 2022 to 4th October 2022 for FXD1/2017/10 and FXD1/2020/15 and from 21st September 2022 to 18th October 2022 for FXD1/2022/25.

In September, the CBK re-opened two bonds – FXD1/2022/10 and FXD1/2022/15 with tenors to maturity of 10 years and 15 years and coupons of 13.5 per cent, and 13.9 per cent, respectively.

Treasury issued the bonds seeking to raise KES 50.0 billion for budgetary support, received bids worth KES 46.1 billion and accepted bids worth KES 39.0 billion translating to an 84.6 per cent acceptance rate.

The weighted average yields were 13.9 per cent for the FXD1/2022/10 and 14.0 per cent for FXD1/2022/15.

In the current fiscal year, the treasury is targeting to borrow KES 578.6 billion from the domestic market as part of the financing for a KES 845 billion budget deficit.

“Preference for local deficit financing, amid tightening global credit conditions, has been undermined by low subscription in government bills and bonds auctions.

So far, the sovereign has met 17.40% of its net domestic target for the FY2022/23 compared to 39.10% at the same time in the FY2021/22.

Comparably weaker demand may be attributed to some lethargy in economic conditions arising from the just concluded electoral calendar as well as preference for cash.

The easing of political risks should however positively reflect in subsequent issuances,”  commentary from NCBA Weekly Fixed Income Report – 19th September 2022.

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