12-year Infrastructure Bond Sale Auction Set for Wednesday

The sale of February’s 12-year amortized Infrastructure Bond (IFB 1/2017/12) worth Ksh30 billion closed on Monday.

The funds are geared towards partial funding of infrastructure projects in roads, energy and water sectors which was arrived at due to its tax-exempt appeal and tap into higher foreign inflows.

The bond had an effective tenor of 8.8 years, and a coupon of 12.5 percent.

However, analysts note that the 12-year historic average in the last two years has been 13.8622%.

“However, market sentiment on this auction has been between 13.40% -13.80% levels for the expected average accepted yield.”

“We are however, sufficiently confident that there will be a tap sale of the same issue in the near future,” according to Genghis Research.

A tap issue is a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues. The bonds are issued at their original face value, maturity and coupon rate, but sold at the current market price.

Cytonn investment’s Analysts had recommended investors to bid at a yield of between 13.50% and 14.25%.

With yields on the Kenya Eurobonds having declined by 4.5 percentage points and 2.4 percentage points, respectively, for the 5-year and 10-year bond due to improving macroeconomic conditions, since mid-January 2016, Cytonn Investments attributes to Kenya as an attractive investment destination.

Investors who made their bids will submit their duly completed bond application forms to any branch of the Central Bank on Tuesday afternoon.

According to CBK, the auction date is Wednesday and on Thursday investors should obtain details of amounts payable for successful bids. Those who will be found to have defaulted may be suspended from subsequent investment in Government Securities.

Read: Kenya to Sign $800 Million Syndicated Loan with Four Banks