CBK Floats 87.8Bn Infrastructure Bond in Switch Auction

Switch auction involves a transaction that exchanges securities held by investors with selected bonds. The transaction is majorly used to increase liquidity in the debt securities market.

Central Bank of Kenya Kisumu Branch I Khusoko

Central Bank of Kenya Kisumu Branch I Khusoko

The Central Bank of Kenya has floated a KSh87 billion switch auction to help relieve the government of its short-term liabilities.

The switch auctions offer existing T-bills and two-year bondholders the opportunity to move their asset’s maturity out to a six-year bond at rates determined by investors through the open auction mechanism.

Switch auction involves a transaction that exchanges securities held by investors with selected bonds. The transaction is majorly used to increase liquidity in the debt securities market.

However, the CBK is using it to reduce the pressure of interest payments to investors holding short-term papers.

“CBK, acting in its capacity as fiscal agent for the Republic of Kenya, invites bids for the infrastructure bond via switch auction that is offered to investors with holdings in T-bills issue Nos. 2494/91, 2454/182, 2380/364 and T-bond issue No. FXD1/2021/2.”

The bond will target both to raise more funds for the government under infrastructure bonds and extend maturities and help restructure the yield curve.

“The bond will be tax-free as is the case for infrastructure bonds as provided for under the Income Tax Act,” CBK said.

The bond will qualify or count as part of the banks’ liquidity ratio requirement to encourage banks to participate in the auction.


 

Experience working on communication and marketing departments and in the broadcast industry. Interested in sustainable development and international relations issues.

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