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The National Treasury plans to raise up to Sh25 billion this month by reopening old bonds to avoid the rising cost of borrowing and a volatile international market.

Central Bank of Kenya (CBK) said in a statement that the government is inviting bids to raise the funds to finance the Budget deficit through three-year and 15-year bonds, which have a yield of 11.7 per cent and 13.9 per cent respectively.

“The Central Bank is pleased to offer eligible investors an opportunity to participate in the tap sale of the above fixed coupon Treasury Bonds whose details are in the prospectus,” CBK said.

Tap sale of bonds

Reopening a bond issue is issuing additional amounts of a previously issued bond. Reopened bonds have the same maturity date and interest rate as the original bonds, but they are sold on different dates and usually at a different price.

The prospectus says that bids are to be submitted between by June 23, 2022 and investors should obtain details of the amount payable for successful bids from CBK on Friday 24th June.

“Bids shall be valued at the average rate of the accepted Treasury Bond auction value dated 11/04/2022 and 25/04/2022,” said CBK.

Currently, the government is having a hard time floating a Eurobond and postponed one planned for this month due to rising volatility on the international money markets.

Experts say the Russian invasion of Ukraine is raising concerns the world may be teetering on a recession.

Kenya’s yield curve has risen significantly this year compared to the previous years resulting in high cost of credit for the government with Treasury at a crossroads due to high inflation which calls for tightening of the interest rates.

At the same time this portends high cost of credit for the government.

During the Treasury Bond auction of June 8, the eighteen year infrastructure Treasury bond issue received Sh76.4 billion worth of bids against an advertised amount of Sh75 billion, representing a performance of 101.8 per cent.

Treasury bill auction of June 9 received bids totalling Sh14.7 billion against an advertised amount of Sh24 billion, representing a performance of 61.3 per cent. Interest rates remained stable, with all the Treasury bills increasing marginally.

Global concerns about inflation remained elevated during the week ending June 9 as the European Central Bank showed intent of raising their benchmark policy rates in July, while India raised its policy rate in line with market expectations.

According to World Bank and the Organisation for Economic Co-operation and Development (OECD) global growth is expected to slow down sharply to 2.9 per cent and 3.0 per cent in 2022 from 5.7 per cent and 5.8 per cent in 2021, respectively.

International oil prices rose during the week ending June 9, reflecting increased oil demand amid supply concerns across several countries.

Murban oil price increased to $122.39 per barrel, compared to $111.71 per barrel on June 2.