National Treasury raises Sh71.4 billion from bond sale, exceeding target
According to CBK, this was made possible by strong investor interest in long-term government bonds and a well-supplied money market.
The National Treasury has raised Sh71.4 billion from its April bond sale, surpassing its target of Sh70 billion.
According to the Central Bank of Kenya (CBK), this was made possible by strong investor interest in long-term government bonds and a well-supplied money market.
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“The strong investor interest in long-term government bonds and a well-supplied money market made it possible for the Treasury to surpass its target in the April bond sale,” it said.
The bond sale, which closed on Wednesday, comprised a pair of reopened 15-year bonds—first issued in February 2020 and April 2022- and a 25-year bond initially floated in October 2022.
Investors bid a total of Sh71.73 billion, with the 25-year bond attracting the highest demand at Sh32.68 billion. The 2020 and 2022 15-year bonds received bids worth Sh20.89 billion and Sh18.15 billion, respectively.
CBK, which acts as the government’s fiscal agent, noted that the accepted bids amounted to Sh71.4 billion.
The 25-year bond saw the highest uptake at Sh32.54 billion, followed by the 2020 and 2022 15-year bonds at Sh20.88 billion and Sh17.98 billion, respectively.
The 25-year paper had a yield of 14.23 per cent on accepted bids, marginally above its coupon rate of 14.18 per cent.
Meanwhile, the 2022 15-year bond returned a yield of 13.82 per cent, slightly lower than its 13.94 per cent coupon.
Price discount
The CBK, however, had to offer a price discount of Sh4.88 per bond unit of Sh100 on the 2020 bond after investors demanded a 13.66 per cent return, exceeding the coupon rate of 12.75 per cent.
By taking up almost all the funds offered by investors, the CBK said it successfully covered a significant portion of this month’s bond maturities, which stand at Sh90 billion.
Government disclosures last month showed that domestic borrowing was ahead of schedule, with net collections of Sh653 billion against a target of Sh583 billion. This month’s bond sale, therefore, aimed to raise enough to meet heavy maturities in April and May.
On April 7, the Treasury is set to repay outstanding maturities of Sh51.3 billion on a three-year bond issued in 2022. The bond had been partially bought back in February for Sh9.3 billion.
Additionally, the Treasury will make a partial repayment of about Sh38 billion on a nine-year infrastructure bond issued in 2020. This bond requires an early repayment of 50 per cent of its outstanding principal of Sh78.9 billion.
May’s maturities include the remaining Sh69.4 billion on a five-year bond issued in 2020 and a Sh14.2 billion principal amount on a nine-year infrastructure bond first auctioned in 2016.
Treasury bonds are a secure, medium- to long-term investment that typically offers an investor interest payments every six months throughout the bond’s maturity.
Investors buying Treasury bonds are loaning the government money for a specified period of time, which is the bond's maturity.
The Central Bank Auctions Treasury bonds on a monthly basis but offers a variety of bonds throughout the year.
Most Treasury bonds in Kenya offer a fixed rate, meaning that the interest rate determined at auction is locked in for the entire life of the bond. This makes Treasury bonds a predictable, long-term source of income.
The National Treasury also occasionally issues tax-exempt infrastructure bonds.
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