The government has announced the issuance of a new 3-year bond with the aim of raising Sh20 billion for budgetary support.

The bond will be auctioned on May 10th, with a period of sale running between April 26th and May 9th. Treasury says that the coupon rate for the bond will be market determined.

Analysts however say that the bond is not a benchmark bond and hence will not affect the performance of the interest rates in the market.

“It is not lost that the 3-year tenor bond is a non-benchmark bond. This simply means that the bond’s yield at no point will be considered in the yield curve. Similar treatment as Invitation for Bid (IFB) issues,” said Churchill Ogutu, chief economist at IC Group.

Treasury also cancelled another 15-year bond due to high bid rates last week signalling the start of choppy waters even as the State awaits to issue a Eurobond.

Debt refinancing

Kenya needs the cash to refinance its debt even as it struggles to raise funding for budgetary support. The government has delayed to pay salaries and county governments have not received funds for the last three months.

The issuance of the bond comes at a time when the Kenyan government is looking for ways to finance its budget deficit. The government is facing a significant revenue shortfall due to the tough economic times arising from the cash crunch and high debt service charges.

The bond will provide much-needed funds for the government to finance its budgetary requirements.

The auction of the bond is expected to raise scrutiny from analysts after the government reopened a 3 year bond last week and took just Sh1 billion out of the Sh7 billion that investors had bid.