The government through the Central Bank of Kenya (CBK) has raised KSh 130.8 billion from two reopened infrastructure bonds in the February sale.
In the auction, which closed on Wednesday, the CBK received bids worth KSh 193.9 billion against the targeted KSh 70 billion – a 277% subscription rate.The CBK accepted only 67.5% of the total received, with KSh 63.1 billion worth of bids rejected as the apex bank continued to nudge rates lower.The 14-year paper with a weighted average rate of 13.9784%, attracted bids worth KSh 93.1 billion while the 17-year paper with a weighted average rate of 14.2806%, attracted bids worth KSh 100.8 billion.
The two papers – the 14 year and 17 year – were first issued in 2022 and 2023 respectively with remaining tenors to maturity of 11.8 years and 15.1 years. With interest rates currently declining, investors rushed to lock in higher returns in the easing rate environment.
The redemption structure for the 14 year paper includes 50% of the outstanding amount which will be remitted on 4th November 2030, and the other half six years later. The 17 year paper will have 50% of the unencumbered outstanding principal amount paid on 28th February 2033 and final redemption on 20th February 2040.
Meanwhile, in the weekly auction, T-bills were oversubscribed for the second consecutive week, with the overall oversubscription rate coming in at 184.4%. The government accepted a total of KSh 25.1billion worth of bids out of KSh 44.3 billion bids received – an acceptance rate of 56.8%.
The yields on the government papers declined with the yields on the 364-day paper decreasing the most by 0.2% to 10.6%. The yields on the 182-day and 91-day papers decreased by 0.14% and 0.1% respectively to 9.4% and 9.0%.
This comes a week after the CBK announced the first ever domestic bond buyback that will see investors sell back select bond issues worth KSh 50 billion before their intended maturity. The buyback, which targets 3 bonds, seeks to ease refinancing pressures in mid-2025 when the bonds are expected to mature. The total value of the three bonds is KSh 185.1 billion comprising the 3-year paper to mature in April 2025, the 5-year paper and the infrastructure bond to mature in May.