State bullish after Sh34b bond re-sale
The government’s foray into the domestic debt market commenced this year with the issuance of a three-year bond and the reopening of a five-year bond, showcasing its continued reliance on bond tap sales.
This has since led to the successful re-opening of Sh34.3 billion from investors through the sale of a three-year Treasury Bond, aimed at supporting various budgetary needs, including debt repayments and new borrowings.
The bond attracted bids totalling Sh43.1 billion, representing a subscription rate of 107.69 per cent, highlighting investors’ confidence in the government’s fiscal policy and economic management. Demand surpassed supply by 26 per cent, leading to oversubscription.
Average accepted bids
The government accepted Sh30.3 billion from competitive bids and Sh3.9 billion from non-competitive bids. The average market rate was 18.515 per cent, slightly lower than the average accepted rate of 18.42 per cent.
As per the Central Bank of Kenya (CBK) prospectus, the coupon rate for the three-year treasury bond is market-determined, while the rate for the five-year treasury bond is fixed at 16.844 per cent. This reopening sets the stage for the government’s involvement in the domestic debt market, indicating strategic manoeuvres to manage its fiscal requirements amidst market complexities.
Kenya’s bond market has maintained its activity since January 2024, with the CBK offering Treasury bonds monthly.
In January, the government raised approximately Sh24 billion from short-term Treasury bills and Sh31.5 billion from long-term Treasury bills. February witnessed the issuance of an eight-and-a-half-year Infrastructure Bond, raising Sh70 billion. March saw the government reopening the three-year Treasury Bond (FXD1/2024/03), gathering Sh34.3 billion.
With impending Eurobond debt repayments totalling Sh254.16 billion, including a $2 billion Eurobond due in June, the government plans to repurchase a significant portion of its June 2024 dollar bonds to enhance market confidence, given the substantial repayment obligation.
It is anticipated that the government will repurchase at least half of the $2 billion Eurobond due in June 2024. This successful mobilization underscores robust investor confidence in Kenya’s fiscal policy and economic management.
