The National Treasury netted Sh71.4 billion from its April bond sale which closed yesterday, helped by a liquid money market and a renewed appetite for long-dated papers by institutional investors.
The government was in the market for Sh70 billion from a pair of reopened 15-year bonds, which were initially floated in February 2020 and April 2022, and a 25-year paper first sold in October 2022.
Investors put up offers of Sh71.73 billion, with the 25-year bond raising the highest volume of bids at Sh32.68 billion, with bids on the 2020 paper at Sh20.89 billion and the 2022 paper at Sh18.15 billion.
The Central Bank of Kenya (CBK)—the government’s fiscal agent—took up Sh20.88 billion on the 2020 paper, Sh17.98 billion on the 2022 bond, and Sh32.54 billion on the 25-year bond.
The 25-year bond had a yield of 14.23 percent on accepted bids, versus a coupon (or actual interest rate) of 14.18 percent, while the 2022 fifteen-year bond returned a yield of 13.82 percent versus a coupon of 13.94 percent.
The CBK was however forced to offer a price discount on the 2020 bond to the tune of Sh4.88 per bond unit of Sh100 after investors demanded a return of 13.66 percent, which was higher than the coupon of 12.75 percent.
By hoovering up almost all the money offered by investors, the CBK was able to cover a large percentage of the month’s bond maturities of Sh90 billion.
Last month, CBK disclosures showed that the government was ahead of target in its domestic borrowing target of about Sh583 billion with net collections of Sh653 billion, meaning that the focus in this month’s bond sale was on raising enough to finance the heavy maturities of April and May.
On April 7, the Treasury will be paying back outstanding maturities of Sh51.3 billion on a three-year bond sold in 2022. The bond was partially bought back to the tune of Sh9.3 billion in February by the government.
On the same day, the Treasury will be making a partial repayment (amortisation) of about Sh38 billion on a nine-year infrastructure bond that was sold in 2020, whose maturity structure calls for early repayment of 50 percent of its outstanding principal of Sh78.9 billion on April 7.
May’s maturities comprise the balance of Sh69.4 billion on a five-year paper floated in 2020, and a Sh14.2 billion principal amount on a nine-year IFB which was initially auctioned in 2016.
The two papers were also included in the February buyback, where the five-year saw Sh35.1 billion worth of notes bought by the CBK, while the IFB had Sh5.7 billion.
