The Central Bank of Kenya (CBK) has reopened two long-term bonds, FXD1/2022/010 and FXD1/2022/015, seeking to raise KSh50 billion from fixed-income investors.
The securities are on sale until September 13, when the period of the auction closes.
Prospectus for Re-Opened Ten-Year and Fifteen-Year Fixed Coupon Treasury Bonds FXD1/2022/010 and FXD1/2022/015 pic.twitter.com/gHBiku6WRG
— Central Bank of Kenya (@CBKKenya) August 25, 2022
In April, the 15-year paper raised Ksh27.6 billion against a target of Ksh 30 billion. The bids received from the bond were KSh32.5 billion, but the CBK rejected KSh4.9 billion of the amounts offered.
In addition, the reopened 10-year bond raised KSh28.6 billion in May, receiving bids worth KSh32.8 billion. The CBK rejected KSh4.2 billion of the amounts investors were willing to invest in the paper.
“We anticipate the central bank to reject aggressive bidding to contain the sovereign’s borrowing costs, especially on longer durations. On the shortest end of the curve, an aggressive search for return may circumvent a sharp rise in yields,” NCBA Market Analysts note.
Tight Liquidity Leaves August Treasury Bonds Undersubscribed
According to NCBA, due to expectations of higher interest rates, the yield curve has, on average, risen by 102bps this year. Of note, shorter durations have been most sensitive to higher inflation and tighter policy expectations.
They further note that since July, the sovereign has raised Ksh 44.09 billion (net) locally, translating to a meagre 7.60% of its total domestic borrowing target for FY2022/23.
Compared to a similar time in the last cycle, Ksh 165.56 billion was raised, constituting a 25% outturn.
“Low demand for government securities may be linked to a preference for cash during the election period. Should election-related risks fade, we anticipate that subscriptions will improve. “
