The government has so far raised Sh220.4 billion in bond issues for the current financial year, 2.7 per cent short of its target of Sh226.6 billion.
According to analysts at Cytonn Investments, this may see the government lean more towards offering short-term bonds targeting the domestic market.
“We expect slight pressure on the domestic borrowing front, which might see it start issuing shorter tenor bonds at the expense of the debt maturity profile,” the firm said in its weekly report.
While investors bid Sh29.4 billion for the 25-year infrastructure bond issue, targeting Sh50 billion at last week’s auction, Central Bank only accepted bids worth Sh16.3 billion.
The 41.2 per cent under subscription recorded during last week’s auction was the first low performance since the year began.
Treasury issued two- and 15-year bonds in January with a target of raising Sh40 billion. Investors flooded the market offering bids worth Sh101.9 billion, a 254.75 per cent oversubscription.
Last month, the Sh50 billion five- and 10-year bonds issued attracted bids worth Sh78.3 billion, a 156.6 per cent oversubscription, slightly lower than January.
“We are neutral on domestic borrowing, as the government is behind its borrowing target,” the report by Cytonn stated.
On the other hand, investor appetite for short term government has continued on an upward trend for the past four weeks.
During last week’s auction, T-bills attracted bids worth Sh47.73 billion against a target of Sh24 billion. This was a 198.86 per cent subscription rate.
“Interest rate on the 91-day Treasury bills increased slightly while those of 182-day and 364-day Treasury bills declined marginally,” CBK said in its weekly report.
Last month, a banking source told Reuters Treasury was in talks with lenders about a plan to issue a $2.5 billion (Sh253.53 billion) Eurobond denominated either in euros or dollars.
In the government’s 2018/19 budget approved by parliament in September, Treasury CS Henry Rotich set a net external financing target of $2.83 billion (Sh287 billion) to partly cover the deficit of Sh562 billion.
