NAIROBI, Kenya- The Central Bank of Kenya (CBK) is set to raise KSh50 billion through a tap sale of reopened infrastructure bonds (IFB) originally issued in 2023.
This move comes as the CBK seeks to attract investors to longer-term bonds despite recent under-subscriptions.
According to the prospectus, the CBK is offering tax-free IFBs with remaining terms to maturity of 5.8 years and 15.7 years, respectively.
The IFB/2023/6.5 Yr bond carries a coupon rate of 17.93pc, while the IFB/2023/17 Yr bond offers a coupon rate of 14.39pc.
Bidding for these market-determined bonds runs until August 14, 2024.
The initial sale of the 6.5-year bond was notably successful, closing with a weighted average rate of 17.9327pc. This issuance saw bids worth KSh88.9 billion against the KSh50 billion on offer, reflecting a 177.8pc oversubscription.
The CBK accepted KSh67.1 billion, rejecting higher-cost bids. Meanwhile, the 17-year bond closed its recent sale with a weighted average rate of 14.3999pc, receiving bids worth KSh59.8 billion against the KSh50 billion target, showing a 119.5pc oversubscription.
Investor Demand and Market Trends
Despite the strong demand in previous sales, the CBK has faced under-subscriptions in recent auctions, with the lowest performance being a 2.8pc shortfall.
The prevailing high interest rates have driven investors to seek higher real returns, factoring in perceived high risks.
The CBK is strategically nudging investors towards longer-dated papers, aiming to reduce reliance on short-term bonds that have been heavily favored. This twin reopening is seen as a maneuver to encourage more substantial lending to the government.
The CBK’s move to reopen these infrastructure bonds is a clear signal to investors, offering an opportunity to invest in longer-term securities with attractive coupon rates.
As the bidding progresses, it remains to be seen how the market will respond to this strategic push.
