Treasury bags Ksh.137B from bonds in January

The National Treasury has continued to find easy pickings from the local debt market having added another Ksh.81.1 billion from an infrastructure bond sale this month.

This to take total proceeds from a pair of bond auctions to Ksh.127 billion to include Ksh.55.9 billion from a two-year Treasury bond (T-bond) sold to investors earlier this month.

The sixteen-year tenured bond continued to draw attraction from investors from its tax free status with bids topping Ksh.125.3 billion against an advertised Ksh.50 billion.

In contrast, the two year T-bond which sought to raise Ksh.25 billion in new borrowing saw bids worth Ksh.61.2 billion as the Treasury continued to profit from heavy appetites for government securities by investors.

The Central Bank of Kenya (CBK) has taken advantage of the high investor subscriptions by accepting bids above the target keeping the National Treasury ahead of its domestic borrowing program for the year ending in June.

As at November for instance, the government was 4.1 per cent ahead of its local borrowing targets for the year having borrowed Ksh.360.6 billion domestically.

At the same time, the CBK has remained vigilant on the cost of contracted debt from the program by taming aggressive bidding through rejection.

The Treasury has nevertheless deployed part of the new proceeds to redeem maturing debt with Ksh.31.1 billion from the infrastructure bond being channelled towards repayments which peaked at their highest in the current 2020/21 cycle this month.

Treasury is expected to continue reaping from a succulent local debt market which further features heavy liquidity from government’s very own redemptions to the same investors.

The government is expected to raise Ksh.786.6 billion from the domestic market by June this year.

Analysts expect short-tenured bond issue to continue delivering the goods for the National Treasury as investors maintain a risk aversion stance on the duration of debt.

“In the current market environment where the spread of the corona virus remains a concern and economic activity is muted, investors are likely to focus on the shorter end of the yield curve,” analysts at AIB-AXYS Africa said in a note.