May Government Bond Issue Announced As Mumias Contemplates To Suspend Core Business

The National Treasury has announced the May government bond issue. The National Treasury has decided to go with a 3.4-year paper FXD2/2010/10 and the FXD1/2009/15 with a remaining tenor of 7.4 Years.

The value of the auction is quite large at 40.0 billion shillings, and with what investors expect may be a green-shoe of 10.0 billion shillings. Economic experts have said that they expect the market to quiet down along these tenors with activity expected to remain on the longer end as well as 2-years and below tenors as well as the IFBs. Most investors will also take a wait and see approach to gauge yield movements after this announcement

The CBK stayed out of the repo market yesterday sighting a square market, while the overnight lending rate continued to come off closing at an average of 5.5 percent against volumes of 17.8 billion shillings.

In other news, reports indicate that Mumias Sugar Company (NSE: MSC) will suspend core business as a result of operational and cash flow challenges.

Last month the miller announced the suspension of operations for three months to repair its equipment which has been contributing to low crash output. Half year loss (accompanied by the profit warning for FY17) worsened 87.2 percent y/y to 2.9 billion shillings from net revenue of 1.5 billion shillings (KES 3.0Bn in 1H16).

The miller last made a profit in 2012, with full year losses widening each year since. Last week, the miller’s CEO, Errol Johnston, did not seek renewal for his term. Altogether, indicates a struggling business in many fronts, company specific and industry-wide.

At the bourse, the market expects a market turnover increased in yesterday’s trading session with interest in Safaricom Ltd (NSE: SCOM), KCB Group Ltd (NSE: KCB), East African Breweries Ltd (NSE: EABL) and Equity Group Holdings Ltd (NSE: EQTY) being the highest.

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