The Central Bank of Kenya (CBK) yesterday reopened the tap sale of two bonds floated last week as it avoids attracting higher debt service costs despite investors’ demand for higher yields in the domestic capital market.

This new sale comes after last week’s offer, which sought to raise 40 billion from investors, and was oversubscribed by 132.5 per cent. The regulator had received bids worth Sh53 billion but due to high interest demand, it rejected all to remain with bids worth only Sh19.1 billion from the two debt instruments.

Fiscal agent

CBK – the state fiscal agent – said it is now seeking to raise Sh21 billion from a tap sale of the 2-year and 5-year fixed coupon Treasury Bonds sold on Aug. 16, signalling the government’s switch to shorter-dated bonds.

“Central Bank of Kenya is pleased to offer eligible investors an opportunity to participate in a Tap Sale of the above Fixed Coupon Treasury Bonds whose details are as in the prospectus issued value date 21/08/2023. The Tap Sale will be offered on a first-come-first-served basis,” CBK stated in the offer note.
According to the note, the sale of the new coupon is between August 22 and 24, 2023 at 2 pm or upon attainment of quantum, whichever comes first.

The payment deadline is August 28. Treasury bonds bids must be submitted to the Central Bank electronically via CBK DhowCSD

CBK has offered an average interest rate of 16.97 per cent on the 2-year debt instrument while the 5-year one will attract 17.95 per cent. The Coupon rate for the two fixed coupon treasury bonds has been set at 16.97 per cent and 16.84 per cent respectively.

The oversubscription of the tap sale seems to be a boost to the government’s revenue mobilisation efforts through local borrowing, whose targets for the current 2023/24 financial year have since been revised downwards to mitigate the upward pressure on interest rates.

The revision, amounting to a substantial 46.1 per cent decrease, now sets the domestic target at Sh316.0 billion. Although investors have generally spurned bonds, preference has shifted towards shorter-dated Treasury bills which are believed to have higher risk-adjusted returns.