CBK Floats 18-Yr Infrastructure Bond Worth KSh 75Bn

The Central Bank of Kenya has floated an 18-year Infrastructure bond worth KSh 75 billion to fund infrastructure projects in the 2021/22 fiscal year budget estimates.

According to the CBK prospectus, the coupon rate for the bond will be market-determined.

The sale period is from 23rd May 2022 to 7th June 2022.

The value and payment date is 13th June 2022, with investors required to place bids at a minimum of KSh 100,000.00.

The bond will be fully redeemed on 21st May 2040, with the first interest payment scheduled for 12th December 2023.

CBK requires bidders to submit their bids by 2.00 p.m. on Tuesday, 7th June 2022, while the Auction Date is Wednesday, 8th June 2022.

This is the second infrastructure bond following the February auction that raised KSh98.6 billion, surpassing the government fiscal agent’s target of KSh75 billion. 

The bond came with a 12.96 per cent tax-free interest.

The government is 4.6% ahead of its prorated borrowing target of Kshs 600.2 bn having borrowed Kshs 627.9 bn of the Kshs 664.0 bn borrowing target for the FY’2021/2022 as at May 20, 2022.

“We expect a gradual economic recovery as evidenced by the revenue collections of Kshs 1.5 tn during the first ten months of the current fiscal year, which was equivalent to 102.0% of the prorated revenue collection target.

However, despite the projected high budget deficit of 8.1% and the affirmation of the `B+’ rating with a negative outlook by Fitch Ratings, we believe that the support from the IMF and World Bank will mean that the interest rate environment will remain stable since the government is not desperate for cash.

Owing to this, our view is that investors should be biased towards short-term fixed-income securities to reduce duration risk,” Cytonn Investment Analysts note.

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