FUNDS

Sh50 billion bond undersubscribed

This means, the Central Bank of Kenya- government’s fiscal agent rejected bids worth Sh13.75 billion at the auction.

In Summary
  • The long-term debt facility attracted investor bids worth Sh34.53 billion, lower than the Sh50 billion on offer amid volatility in the global bond market as a result of the coronavirus pandemic.
  • The market-weighted average rate for the auction stood at 11.788 per cent against an underlying coupon rate of 11.667 per cent.
Treasury buildings.
Treasury buildings.
Image: MONICAH MWANGI

The National Treasury raised Sh20.78 billion from the five-year bond sale at this week's auction. 

The long-term debt facility attracted investor bids worth Sh34.53 billion, lower than the Sh50 billion on offer amid volatility in the global bond market as a result of the coronavirus pandemic.

This means, the Central Bank of Kenya- government’s fiscal agent rejected bids worth Sh13.75 billion at the auction.

The market-weighted average rate for the auction stood at 11.788 per cent against an underlying coupon rate of 11.667 per cent.

“Investors are now attaching a higher risk premium on the country due to the anticipation of slower economic growth attributable to the locust invasion, coupled with the entry of the novel COVID-19 in Kenya’s borders, further dampening the country’s economic growth prospects,” Cytonn Investments said in its weekly report.

According to the Capital Markets Soundness report released early this week, Covid-19 effects have forced investors to rebalance their portfolios by looking for more stable avenues to invest in.

“As a result, this has driven up bond prices globally, leading to the lowering bond yields,” the report stated.

The National Treasury has been grappling with deficit financing from debt sources with the projected recession by both the World Bank and the International Monetary Fund (IMF) triggering reduced liquidity from emerging and developing economies.

According to data from the National Treasury, gross borrowing stood at Sh378.4 billion at the end of February against a target of Sh514 billion in the government’s fiscal year to June.