Central Bank of Kenya (CBK) is seeking to raise Sh15 billion through a tap sale for budgetary support days after raising over Sh200 billion in the previous infrastructure bond.
“Central Bank is pleased to offer eligible investors an opportunity to participate in a tap sale of the above-fixed coupon Treasury bond,” it said in the auction statement yesterday.
The bond has a coupon of 14.2 per cent but the yield shall be determined by the market price. CBK last week issued an infrastructure bond in which investors locked in yields of 15.8 per cent pushing the yield curve towards the 16 per cent mark.
The apex bank is targeting to keep borrowing rates low by reopening old bond issues rather than floating new ones.
Borrowing target
Former CBK Governor Patrick Njoroge said Treasury struggled to raise the domestic borrowing target this year adding that next year will be even more difficult.
The rising yields are also hurting the performance of the secondary bond market as prices decline hurting those holding the secondary bonds on the Nairobi Securities Exchange.
“Bond turnover in the secondary bond market declined 56 per cent in the week ending June 15,” CBK said in the Weekly Bulletin. Meanwhile, the Treasury bills auction of June 15, received bids totalling Sh22.6 billion against an advertised amount of Sh24.0 billion, representing a performance of 94.2 per cent. Interest rates remained stable, with 91-day, 182- day and 364-day rates increasing marginally.
During the Treasury bond auction of June 14, the 7-year Infrastructure Treasury bond received bids totalling Sh220.5 billion against an advertised amount of Sh60 billion, representing a performance rate of 367.5 per cent.
The financial year 2022/23 actual net domestic cumulative borrowing as of 16th June 2023 stood at Sh419.4 billion against a target of Sh425.11 billion (98.7 per cent performance).
“There are strong indications that the target for the year will be met during the next auction,” Treasury said.
Kenya targets to raise over Sh500 billion in the next financial year owing to a higher budget of Sh3.6 trillion. An estimated Sh1.6 will be spent on debt service.