Kenya floats new treasury bond seeking to raise Ksh 60 billion to fund its budget


NAIROBI, (GO) - The Central Bank of Kenya(CBK) has floated a national treasury bond worth KSh 60 billion seeking to fund its government budgetary support under its 2022/2023 domestic borrowing program.

CBK bid has invited investor bids for three papers, including two re-opened ten and 15-year papers with 4.9 years and 12.3 years to maturity. Additionally, a new 25-year paper has been offered to investors in the dual auction.

The reserve bank will seek to keep yields on the two re-opened papers around the bond's coupon rates of 12.966 and 12.756 percent per annum against pressure for a higher payout from investors.

The auction comes when the State has been struggling to raise its targeted amounts from the local debt market. September’s issuance that targeted Sh50 billion raised Sh39.02 billion from bids of Sh46.1 billion.

In the first two months of the fiscal year (July and August), the government issued three bonds seeking a total of Sh110 billion but only managed to raise Sh54.2 billion.

In the current fiscal year, the government is targeting to borrow Sh578.6 billion from the domestic market as part of the financing for an Sh845 billion budget hole.

Banks, the biggest holders of government debt, have been wary of taking on new bonds due to valuation losses on their holdings when secondary market yields are rising. Bond prices or valuations fall when yields rise.

There has also been little in the way of foreign investor interest in the local securities market, given the higher rates on offer in the US, which is deemed a haven in times of global economic uncertainty.

The sale, however, comes in a period of relatively high liquidity in the money market, which would ideally help the deal due to limited investment returns in other asset classes, such as equities.


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