The National Treasury has floated a seven year Sh60 billion tax-free infrastructure bond with partial redemptions in a bid to attract more investors.

This comes as investors appetite for longer-dated securities dis, prompting the government to devise innovative solutions to attract the much-needed capital to run the economy.

The tax-free infrastructure bond aims to entice investors by offering partial redemptions, a feature designed to make the bond more attractive and flexible, easing the cost of doing business for the investors.

“The bond will be tax free as is the case for infrastructure bonds as provided for under the income tax Act,” CBK said.

Liquidity concerns

By offering periodic repayments of principal amounts, Treasury seeks to address concerns about liquidity and provide investors with an opportunity to realise returns before the bond’s maturity.

The Sh60 billion raised through this bond issuance will be dedicated to financing various infrastructure projects.

From upgrading transportation networks to enhancing power generation capacity, the funds will be allocated strategically to bolster the nation’s economic development and improve the lives of its citizens.

The first redemption will be in June 2026, when investors will receive 20 per cent of the interest. The second redemption is in 2027 with 30 per cent redemption and eventually 2030. The auction date is June 14, 2023.

This strategic approach further reflects the government’s commitment to overcoming financing hurdles to build crucial infrastructure and spur development in the country.

With the budget in need of additional funds, Treasury aims to be very busy in the bond market by mobilising the necessary resources to propel the nation’s growth.

The National Treasury has in the recent past been issuing tap sales and issuing short term papers in order to stay within the market’s risk appetite.

Last month the Treasury issued a 10-year bond which it had to cancel due to low demand.