Treasury eases cash-crunch in Ksh.49 billion securities roll-over

The National Treasury has cushioned itself from a potential cash crunch as investors agree to roll over Ksh.49.1 billion worth of Treasury bills and bonds which were set to mature on January 9.

The amounts have been rolled over into a new six-year Infrastructure bond which has a coupon of 13.215 per cent.

The switch bond which received bids totalling to Ksh.52.9 billion against a target of Ksh.87.8 billion covers T-Bill issue numbers 2494/091, 2454/182, 2380/264 and T-Bond FXD1/2021/2.

By agreeing to roll over the partial sum of Ksh.49.1 billion, the Treasury will only be meeting maturities of Ksh.38.7 billion at the start of 2023 with the exchequer significantly cushioned from any potential liquidity stretch at the end of the festivities.

“We believe that the main reason for this issue is to lengthen maturity profile of domestic debt and thus reduce refinancing risk,” noted analysts at Sterling Capital.

The lower subscription by investors to the switch bond was however widely expected with some holders of securities covered in the issue set to redeem their investment.

“As it is not a mandatory switch bond, we would expect some investors to reject it perhaps due to their liquidity needs or preference for shorter duration investment instruments especially in an environment of rising interest rates,” added the analysts at Sterling.

The December switch bond was as surprising as the first issued in 2020 as the government seeks to re-profile domestic debt maturities with a bias of longer tenures to manage liquidity challenges including high refinancing costs in the short-run.

The new Treasury Cabinet Secretary Prof. Njuguna Ndung’u has for instance outlined plans to refinance part of the domestic debt portfolio with the view of managing debt service costs.

Treasury has put out a Ksh.40 billion cash fall through two re-opened 20 and 25-year papers which are on auction until Tuesday next week as it seeks to wrap up local borrowing in the current financial year.