Skip to main content
September 25, 2018

State struggling to attract bond bids

Cytonn Investment fund Operations analyst Patrick Mumu with investment analyst Caleb Mugendi during the release of the banking sector report on September 18,2017/ENOS TECHE
Cytonn Investment fund Operations analyst Patrick Mumu with investment analyst Caleb Mugendi during the release of the banking sector report on September 18,2017/ENOS TECHE

The government has accepted bids worth Sh175.17 billion in Treasury bonds auctioned by the Central Bank of Kenya in the eight months to August.

Data by the government’s fiscal agent shows although the National Treasury has been floating bonds monthly since January, the long-term debt facilities have been undersubscribed due to lower yields. 

Investors seem to have adopted a wait-and-see attitude, instead buying short term paper while awaiting the outcome of the proposed review on interest rate cap law.

Analysts believe scrapping the law will allow banks to raise interest on credit to the private sector which will increase cash flow pushing government to increase interest on debt instruments.

The lowest subscription rate recorded was in June when investors offered bids worth Sh10.13 billion of Sh40 billion offered under a 25-year bond. CBK accepted bids worth Sh5.17 billion at an average weighted interest of 13.41 per cent.

In March, CBK also re-opened the sale of two 15-year bonds issued in 2010 and 2013, raking in Sh3.82 billion of the Sh27 billion offered at interests of 10.25 and 12 per cent respectively.

“The government has not achieved much in lengthening their liability profile mainly due to the poor performance of the longer dated bonds in the auction market,” said Cytonn Investment analysts in their weekly market report.

Poll of the day