CBK mulls exchanging T-Bills to bonds on COVID-19 pressure
The Central Bank of Kenya (CBK) is mulling to switch Treasury bill (T-bill) investors to bonds on the back of the pressure brought about by the coronavirus pandemic.
According to the regulator, the decision is being advised by a view to provide relief to exchequer upcoming redemptions on domestic debt.
It has been pinned on its June infrastructure bond issue whose eligibility has been specified to holders of a one-year T-bill maturing on June 1, 2020.
The reserve bank aims to lure the investors of the bond to rollover their investment in the T-bill to the six-year amortized bond which carries a tax-free tag.
The bond whose sale runs between May 14 and May 26 aims to raise Ksh.25.6 billion and has a value date equivalent to the maturity of the one-year paper tagged 2236/364 which raised Ksh.23.5 billion in proceeds.
George Bodo a Director at Callstreet Research and Analytics termed the issue as a special sale borne by the Covid-19 pandemic which has seen the government mull a restructure to part of its domestic debt.
“As an investor you have two options. You can decide to roll over or make the call to have your proceeds placed in the new bond,” he reckoned.
The National Treasury and the CBK have long favoured investments in bonds over T-bills in view to stretch the tenor and maturity of local debt among which the holders include commercial banks and pension funds.
The desired restructure comes on the back of proposals by The Actuarial Society of Kenya (TASK) to freeze interest payments on pension assets invested in government securities for up to two years in a means to provide relief to the exchequer.