CBK Announces Ksh 35Bn Tap Sale on the Infrastructure Bond

The Central Bank of Kenya has announced a tap sale worth Ksh 35 bn with the period of sale between Tuesday and Thursday of its 15-year amortized Infrastructure Bond.

“However, the general sentiment is biased against a positive uptake as a rate below 13.0 per cent level does not compensate the duration risk,” notes Genghis Capital Analysts.

On the other hand, Stephanie Kimani a Research Economist at Commercial Bank of Africa says “… it will be interesting to gauge market appetite for the Tap sale at the prevailing yield.”

The government raised accepted only Kshs 5.0 bn out of the Kshs 55.8 bn worth of bids received, translating to an acceptance rate of 9.0 per cent from its 15-year amortized Infrastructure Bond (IFB 1/2018/15), with an effective tenor of 13.0 years, and a coupon of 12.5 per cent, in a bid to raise Kshs 40.0 bn to fund infrastructure projects in the current fiscal year.

The overall subscription rate for the bond issue came in at 139.4 per cent, with the market average bid rate coming in at 13.0 per cent, way above the average accepted rate of 12.5 per cent.

Cytonn Investments said, “The rates have been kept artificially low by the government through their rejection of bids they deem expensive, despite pressure from investors who are demanding higher rates, and thus rates on government papers could be misleading in reflecting the accurate risk-free rate for the Kenyan economy.”

Genghis Capital also reported that the Two-year bond – FXD1/2016/2 –  totaling KES 20.15Bn matured on Monday which may have propelled healthy trading at the short-end.