The government has floated a Sh60 billion infrastructure bond, the first such issue this year.
The nine-year bond will have a coupon rate of 10.85 per cent to be paid after every six months starting October 12 this year to the same date in 2027.
The bond interest will not attract tax – amounting to 10 per cent – normally charged on the other issues.
An investor is expected to put in a minimum of Sh100,000, but with subsequent amounts in Sh50,000.
The Central Bank of Kenya (CBK) which conducts the auction on behalf of the National Treasury is expected to ride on recent monitory incentives it gave to lenders to free cash into the market on coronavirus outbreak, to meet the target.
It is however not certain if the amount will be used for the intended purpose, coming at a time when there is a freeze in the development budget with funds being channeled to mitigate the effects of the virus, which had by Wednesday infected 81 people.
Experts are however projecting an under subscription, citing low interest offered.
Clement Manyonyi, a capital market trader told the Star that the coupon rate offered is way below compared to the other two such bonds issues last year.
He added that although lending to the government is secure, fund managers and banks are likely to put their cash in high-value projects.
''The repeal of interest cap law in November makes ordinary lending more lucrative. Banks, which are the highest buyers of government securities are likely to take a risk for a higher premium,'' Manyonyi said.
Titus Kimeu, on the other hand, said the government must let the bond coupon be market-determined, insisting that the interest offered is not enticing enough.
The infrastructure bond of the similar amount issued in October last year was market determined while the one issued in February last year came with a 12.2 per cent coupon.
