•In the past week week, T-bills were undersubscribed for the second consecutive week, with the overall subscription rate coming in at 84.1 per cent.
•The sale of the new coupon is between Friday, 22nd September 2023 to Thursday, 28th September 2023 or upon attainment of quantum, whichever comes first.
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The Central Bank of Kenya has floated a Sh15 billion tap sale of fixed coupon treasury bonds, amidst increased pressure from investors for higher yields in the domestic capital markets.
The state fiscal agent is now seeking to raise the Sh15 billion from a tap sale of the two-year and 10-year fixed coupon treasury bonds, signaling the state’s plan to ease external borrowing.
A tap sale (issue) is a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues.
The bonds are issued at their original face value, maturity, and coupon rate but are sold at the current market price.
“Central Bank of Kenya is pleased to offer eligible investors an opportunity to participate in a Tap Sale of the above Fixed Coupon Treasury Bonds whose details are as in the prospectus issued value date 18/09/2023. The Tap Sale will be offered on a first-come-first-served basis,” CBK stated in the offer note.
The sale of the new coupon is between September 22-28, or upon attainment of quantum, whichever comes first.
The regulator says it has offered an average interest rate of 17.45 per cent on the two-year debt instrument, while the 10-year one will attract 17.93 per cent.
In the just concluded fiscal year , Treasury had struggled to meet its local financing needs as investors shunned State papers.
However, CBK has been raising the yield for government paper just above the market average to increase their attractiveness.
The coupon rate for the two fixed coupon treasury bonds announced has been set at 16.97 per cent and 15.04 per cent respectively.
The payment deadline is October 2, 2023. Treasury bond bids must be submitted to the Central Bank electronically via CBK DhowCSD.
As per the regulatory guidelines, bids must be priced based on the average rate of accepted bids from the Treasury Bond auction on the value date of 18/09/2023, with adjustments made for accrued interest.
This comes at a time when the government paper has continued to record mixed performance according to CBK.
In the past week, T-bills were undersubscribed for the second consecutive week, with the overall subscription rate coming in at 84.1 per cent, from the undersubscription rate of 92.1 per cent recorded the previous week.
Investors’ preference for the shorter 91-day paper persisted, with the paper receiving bids worth Sh16.1 billion against the offered Sh4.0 billion, translating to an oversubscription rate of 401.7 per cent, albeit lower than the subscription rate of 450.0 per cent recorded the previous week.
The subscription rate for the 364-day paper decreased to 25.3 per cent from 34.1 per cent recorded the previous week, while that of the 182-day paper increased to 15.8per cent from 7.0per cent recorded the previous week.
The government accepted a total of Sh18.8 billion worth of bids out of Sh20.2 billion of bids received, translating to an acceptance rate of 93.1 per cent.
The yields on the government papers were on an upward trajectory, with the yields on the 364-day, 182-day and 91-day papers increasing by 43.9 basis points, 52.5 basis points and 27.2 bps to 15.2per cent, 14.9per cent and 14.8per cent, respectively.