May Bonds underperform as Treasury raises Ksh.31 billion against Ksh.60 billion target
The National Treasury has managed to raise a mere Ksh.31.7 billion from bonds this month against a target of Ksh.60 billion.
This is as the Central Bank of Kenya (CBK) cuts out expensive investor bids even as subscriptions fall below targets.
Investor bids on the new 10-year paper and the re-opened 25-year bond which traded between April 28 and May 10 for instance stood at Ksh.43.1 billion to represent a 71.9 percent performance rate.
Subscriptions to the issue were concentrated on the new 10-year paper as investors avoid term risks in the face of renewed volatility in the money markets.
The shorter dated 10-year paper received bids of Ksh.32.9 billion in contrast to Ksh.10.2 billion for the longer dated issue.
The pressure on returns by investors was mirrored in the weighted average rate of accepted bids.
Average yields on accepted bids on the shorter dated 10-year paper stood at 13.49 percent while returns on the longer issue stood at 13.976 or about 52 basis points higher than the paper’s coupon rates.
Yields on government paper are expected to remain on the rise all year as investors weigh the impact of prevailing macroeconomic conditions including inflation and the upcoming August 9 General Elections.
The entire proceeds from the bond sale represent new borrowing from the government which now finds itself falling behind its annual borrowing program from lower investor interest for Treasuries and the relatively expensive offers on the table.