Treasury has opened the sale of a Sh75 billion 21-year amortized bond which will go towards funding infrastructure projects in financial year 2021/2022 budget.

The move to test the liquidity of Kenya’s money market will run between August 20 and September 7 this year, with the auction date set for September 8 this year.

Central Bank of Kenya (CBK) says in a prospectus posted yesterday, the redemption date for the bond is August 18, 2042.

“The Central Bank of Kenya, acting in its capacity as fiscal agent for the Republic of Kenya, invites bids for the above bond,” reads the CBK bond prospectus in part.

Fixed coupon

The proceeds will be used to pay contractors and rehabilitate dilapidated network across the country.

The Sh75 billion sale follows another bond announced in June where the National Treasury sought to raise Sh60 billion to go towards budgetary support through re-opened 10 year and 20 year bonds, and a new 20-year fixed coupon Treasury bond.

The bond which was over subscribed raised bids worth Sh116.9 billion out of which the government took up Sh79.9 billion.

Analysts attributed the oversubscription to high liquidity in the market coupled with growing appetite on government securities.

“The Central Bank will rediscount the bond as a last resort at 3 per cent above the prevailing market yield or coupon rate whichever is higher, upon written confirmation to do so from the Nairobi Securities Exchange,” CBK said.

CBK data

In this financial year, Treasury will be seeking to raise Sh3.6 trillion to go towards funding the budget, Kenya’s largest ever. It, however, faces a Sh1 trillion budget deficit to be financed mostly from loans.

Treasury plans to borrow Sh658.5 billion from domestic sources. This is even as the government faces constant criticism over its management of the ballooning public debt.

According to CBK data, Kenya’s public debt stands at Sh7.7 trillion as of June this year.