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CBK’s 8.3-Year-Bond Oversubscribed, Ksh 59 Billion Worth Of Bids Received

BY Soko Directory Team · January 20, 2025 10:01 am

During the week, the Central Bank of Kenya released auction results for two re-opened bonds: FXD1/2018/015 with 8.3 years to maturity and a fixed coupon rate of 12.7%, and FXD1/2022/025 with 22.7 years to maturity and a fixed coupon rate of 14.2%.

The bonds attracted strong demand, with a subscription rate of 196.7%, receiving bids worth Ksh 59.0 billion against the Ksh 30.0 billion offered. The government accepted bids worth Ksh 48.5 billion, reflecting an acceptance rate of 82.2%.

The weighted average yield for accepted bids on FXD1/2018/015 was 14.2%, exceeding the expected range of 13.45%-13.85%.

Read Also: Data Shows A Growing Demand For Government Bonds And Bills

For FXD1/2022/025, the yield was 15.7%, aligning with the expected range of 15.65%-16.00%. Notably, the yield for FXD1/2018/015 was higher than the 12.7% recorded in its last auction in July 2021, while the yield for FXD1/2022/025 surpassed the 14.2% recorded during its last offering in October 2022.

With the inflation rate at 3.0% as of December 2024, the real returns on FXD1/2018/015 and FXD1/2022/025 are 11.2% and 12.7%, respectively. These bonds also benefit from a lower tax rate of 10.0% compared to the 15.0% withholding tax for shorter-term bonds.

Consequently, the tax-equivalent yields stand at 15.0% for FXD1/2018/015 and 16.6% for FXD1/2022/025, making them attractive options for investors seeking long-term, tax-efficient returns.

The oversubscription and competitive yields underscore investors’ confidence in Kenya’s fixed-income securities despite rising yields compared to previous issuances.

Read Also: T-Bills Record First Undersubscription In Two Weeks As Kenyans Go For Shorter Tenors

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