Kenyan public debt now sits at 52.6 percent of GDP at 4.0 trillion with 51.9 percent foreign debt. The key highlight has been that the growth in borrowing has been outpacing growth in tax revenue, with government consistently missing collection target (current 9 month to March 2017 shortfall of 65.9 billion.
With the lag in revenue collection target and continued large public sector infrastructure spend (China may extend $3.6 billion for the third phase of SGR, Economists see debt/GDP continue to sustain its upward trajectory especially from the foreign-denominated side, a key economic concern.
The auction results were conservative to say the least subscriptions were slightly below the 40.0 billion shillings the treasury was looking for at 38.0 billion shillings.
The performance on the shorter 3-year paper was poor despite the amount of liquidity in the market, we believe this was driven by what a number of investors viewed as a weak coupon. Bids on the longer 7-year bond were better at 24.0 billion shillings driven by heavy participation from both asset managers and insurance companies who have been starved of duration most of this fiscal year.
The expected distortion on the yield curve from the auction did not happen with both bonds coming in at market rates, this anti-climax on the market as well as the expected tap sale to be announced next week we believe will cause subdued secondary market activity. The Central bank sat out of the market yesterday sighting a square market.