DEBT

Treasury goes for Sh60 billion in extended bonds sale

The pair of bonds, which will be on sale until July 19, have coupon rates of 12 and 12.75 per cent respectively

In Summary
  • The first prospectus on the tap sale covers Sh20 billion
  • Net domestic borrowing for the new 2022-2023 financial year is estimated at Sh570.2 billion.
The Central Bank of Kenya along Haile Selassie Avenue./FAITH MUTEGI
The Central Bank of Kenya along Haile Selassie Avenue./FAITH MUTEGI

The National Treasury has resumed its domestic borrowing spree ahead of the next financial year starting July 1, perhaps a remedy to expensive external commercial loans.

It has been floating at an average of Sh60 billion every month since January.

On Wednesday, the Central Bank of Kenya, the exchequer’s monetary agent issued two prospectuses that encompass the extended sale of recently issued papers including an infrastructure bond.

Early this month, Kenya canceled the sale of a $1 billion (Sh117 billion) Eurobond that it had planned before the end of the current financial year, citing the high yield rate due to the strong dollar.

Cabinet Secretary National Treasury Ukur Yatani indicated that the government would instead borrow from commercial banks after the Russia-Ukraine war caused yields to surge in the international markets, causing yields on the country’s previous Eurobond to double to 12 per cent.

The exchequer had in January said it would issue a new sovereign bond for 2021/22 (July-June) financial year to partly plug a 7.5 per cent budget deficit.

The first prospectus on the tap sale covers Sh20 billion from the tap sale of June’s infrastructure bond whose primary sale had raised Sh73.8 billion against a higher Sh75 billion target.

It runs to Thursday next week and will offer investors a return of 13.742 per cent.

The second prospectus which aims to raise Sh40 billion covers two re-opened fifteen-year bonds with tenures of 5.8 and 11.3 years to maturity.

The pair of bonds, which will be on sale until July 19, have coupon rates of 12 and 12.75 per cent respectively.

The CBK will be betting on the re-opened issues to drive down the cost of borrowing/interest rates even with investors expected to widely demand a premium in taking up the bonds on offer.

The new bonds prospectuses come barely a week after the National Treasury closed its local borrowing programme for the 2021-2022 financial year.

The exchequer is set to greatly leverage the local domestic debt market to meet the budget deficit for the upcoming fiscal year.

Net domestic borrowing for the new 2022-2023 financial year is estimated at Sh570.2 billion.