CBK Falls Short On The Ksh 50bn Bond Over Long Tenor Periods

The Central Bank of Kenya (CBK) has fallen short of its 50 billion shillings bond that was meant to be raised for budgetary support.

According to a weekly report by Cytonn Investments, during the sessions last week, the Central Bank of Kenya released the auction results for the recently issued bond, FXD1/2020/15, and the reopened FXD1/2018/25.

The two bonds had effective tenors of 15.0-years and 23.3-years, respectively, and coupon rates of 12.8% and 13.4%, respectively, in a bid to raise 50.0 billion shillings for budgetary purposes.

The overall subscription rate for the two bonds came in at 85.0 percent, with the government receiving bids worth 42.5 billion shillings lower than the quantum of 50.0 billion shillings.

The low performance is mainly attributed to the relatively long tenor periods of the two bonds with most investors trying to minimize duration risk.

The yield on the 15-year bond came in at 13.0 percent, while the yield on the 25-year bond came in at 13.6 percent.

The government accepted 27.9 billion shillings out of the 42.5 billion shillings worth of bids received, translating to an acceptance rate of 65.6 percent.

The government has been striving to release bonds in an effort to raise funds and cut on the government’s appetite for both local and foreign loans.

Kenya’s public debt has been ballooning with each passing year. Currently, the debt stands at 62 percent of the country’s gross domestic product (GDP).

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In the money markets, 3-month bank placements ended the week at 7.6 percent  (based on what we have been offered by various banks).

The 91-day T-bill came in at 7.3 percent, while the average of Top 5 Money Market Funds came in at 10.1 percent, unchanged from the previous week.

The yield on the Cytonn Money Market Fund came in at 11.0 percent, unchanged from the previous week.

On Investing in money market funds, Kenyans are yet to have enough information about how money market funds work and how they can invest in them. There is a need for companies to give more information about the venture.

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