Central bank seeks Sh50bn from two reopened bonds

Capital Markets

Central bank seeks Sh50bn from two reopened bonds


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The Central bank of Kenya, Nairobi on Wednesday, December 30, 2020. PHOTO | DENNIS ONSONGO | NMG

The Central Bank of Kenya (CBK) has reopened two long-term bonds seeking to raise Sh50 billion from fixed-income investors.

The government’s fiscal agent is offering a 15-year security, which was first sold in April at an average interest rate of 13.94 percent.

A 10-year paper, which was auctioned in May at an average interest rate of 13.49 percent, is also on offer.

The securities are on sale until September 13 when the period of the auction closes. Re-opening of the bonds comes at a time when fixed-income investors have been demanding higher rates in response to rising inflation, forcing the CBK to reject some of the most aggressive bids.

The 15-year paper raised Sh27.6 billion in the April auction, falling short of the target of Sh30 billion.

The bond had received bids of Sh32.5 billion on the security, with CBK rejecting Sh4.9 billion of the amounts offered. The 13.94 percent coupon on the paper is the most lucrative among the 15-year bonds outstanding in terms of the interest rate set in the primary market.

The reopened 10-year bond raised Sh28.6 billion in May, having received bids worth Sh32.8 billion. The CBK rejected Sh4.2 billion of the amounts investors were willing to invest in the paper.

Major investors in treasuries have been pushing for higher rates amid rising inflation and the weakening of the shilling against major world currencies.

Institutional investors led by banks, pension funds, and insurers usually state the interest they want to be paid while most small investors typically settle for the market average.

Analysts say rising inflation around the world has seen investors seek higher rates in their fixed income portfolios.

“The current high global and local inflation is pushing investors to seek better real returns by placing aggressive bids as compensation for the rising inflation,” AIB AXYS Africa analyst Solomon Kariuki in a recent market brief.

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