10-Year Treasury Bond Undersubscribed As Investors Lose Trust

The government of Kenya, through the National Treasury, flooded a 10-year Treasury Bond with an aim of raising 20 billion shillings. Stats from the Central Bank of Kenya (CBK) show that Treasury only managed to raise 3.57 billion shillings.

The results show that the subscription rate was 17.85 percent. The worst subscription in decades and questions are being asked as to what might have contributed to such a dismal performance. Initially, people would rush to invest in bonds.

Here are the results from the Central Bank of Kenya:

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One of the investors who has been investing in every bond by the government told us that he did not do it this time because he has lost confidence in the government’s ability to repay debts. He says that was the general feeling among most of his fellow investors.

The Kenya Kwanza Government has been struggling to meet its financial obligations ever since it took over power. There seems to be confusion in virtually every sector struggling financially. County governments are almost collapsing because there is no money.

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Investors also pointed out that they are likely to get faster and better returns on their investment elsewhere as compared to investing in Treasury Bonds. Others indicated that they did not have the cash to spare to invest in the latest Treasury Bonds.

Traditionally, commercial banks, Saccos, and Market Funds have been the greatest investors in Treasury Bonds. At some points, banks cut lending to individuals and focused on lending to the National Government. Is this likely to change?

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