Treasury plans to sell 60 billion shillings bonds in October

Capital markets

Treasury plans to sell 60 billion shillings bonds in October


The Central Bank of Kenya, Nairobi. PHOTO FILE | NMG

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Summary

  • The Treasury opened the sale of a 60 billion shillings bond for October, hoping to capitalize on improving liquidity in the domestic market.
  • A prospectus issued by the Central Bank of Kenya (CBK) indicates that the bond will be offered in three tranches, covering maturities between six and 25 years.

The Treasury opened the sale of a 60 billion shillings bond for October, hoping to capitalize on improving liquidity in the domestic market.

A prospectus issued by the Central Bank of Kenya (CBK) indicates that the bond will be offered in three tranches, covering maturities between six and 25 years.

The three past bonds were reopened for the October issue, consisting of two 15-year papers sold for the first time in 2013 and 2019 and with maturities of 6.4 years and 12.9 years respectively.

The third tranche is a reopening of the 25-year bond that was first sold in July of this year, which is now 24.7 years old to maturity. The July bond attracted offers worth 39.9 billion shillings when it was initially sold.

The outlook for the October bond, however, depends on the liquidity situation over the next two weeks.

The excess liquidity that had supported the strong auctions seen on recent bond sales tightened following the massive sweep that took place via the September infrastructure bond, which raised 106 billion shillings, and the continuation of open market operations by the Central Bank of Kenya (CBK).

This week, the liquidity situation will be softened by bond maturities and coupon payments estimated at 47.96 billion shillings. However, some tax settlements during the week and the build-up of the balance early in the cycle could somewhat offset the positive liquidity disposition, delaying the return to pre-IFB equilibrium, ”the NCBA said in a fixed income report earlier this week.

The large maturity gap between the three bond tranches could, however, help increase demand by targeting a wider variety of investors, from banks that prefer short-term papers to pension funds that opt ​​for long-term obligations.

The Treasury has already borrowed a net amount of 278 billion shillings from the domestic market, which is 42% of the target of 658.8 billion shillings for the fiscal year ending June 2022.

The new bond, which is on sale until October 5, should therefore increase net borrowing beyond 50% of the target well before the middle of the year (December) if its performance reflects that of recent issues. .

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