CBK extends sale of five-year Treasury bond in a Tap Sale

The Central Bank of Kenya has extended its  Ksh 16.5 billion five-year Treasury bonds in a tap sale.

The bond will have an average yield rate and a coupon of 12.517 percent, and it will receive bids until November 2.

At its last auction, the overall subscription rate for the bond issue came in at 66.9 percent, with the market average bid rate coming in at 12.6 percent, slightly above the accepted rate of 12.5 percent.

The government did not accept expensive bids, accepting only Kshs 13.5 bn out of the Kshs 20.1 bn worth of bids received, translating to an acceptance rate of 67.3 percent.

“We expect the government to continue rejecting expensive bids on government securities while maintaining interest rates low to prevent further crowding out of the private sector by banks as they channel more funds towards government securities,” notes Cytonn Investments.

“However, pressure could mount on the government, given the tight liquidity levels currently being experienced in the market, due to heavy reverse repo maturities and transfer from banks – taxes, the government being behind its domestic borrowing target, and the expected low revenue collections by the Kenya Revenue Authority (KRA),” they add.