Govt Seeks Ksh 25 Billion Treasury Bonds in a Tap Sale

The Central Bank of Kenya  has reopened its  10 year Treasury bond (FXD1/2017/10) worth Ksh 24 billion in a tap sale.

The sale is going at the average accepted yield rate of 12.966 percent . The offer is open from 1 – to 3 August  2017.  

Analysts in the market say “this is a poor strategy as tap sales only work when the market is liquid and the bond issue is oversubscribed during the initial auction”.

“We expect this tap sale to perform poorly but for the savvy investor this is a good opportunity to take up the bond which we believe will be a top pick in the next few months,” according to Genghis Capital Analysts.

On Monday, the CBK injected liquidity through reverse repo, they received bids worth KES . 20Bn and accepted KES 10Bn at 10.5percent, the overwhelming response from the market is just an indicator of the current environment.

The regulator managed to sell only Ksh 5.19 billion of its 10-year Treasury bond (FXD 1/2017/10) against the target of Ksh 30 billion. The bond issue received a 63.5 percent subscriptions rate, with the market average rate for the bids coming in at 13.3 percent, 30 bps above the accepted rate of 13.0 percent.

“Just like the previous bond auctions held this year, in which the government has only accepted 71.3 percent of total bids on average, the government did not accept expensive bids, accepting only Kshs 5.2 bn out of the Kshs 19.0 bn worth of bids received, translating to an acceptance rate of 27.3 percent,” according to Cytonn Investments.