The Central Bank of Kenya (CBK) has announced a Tap Sale of the Ksh.25 billion Treasury Bond that was initially issued on November 13, 2023.
It has a maturity period of 6.5 years and a coupon rate of 17.9%. The CBK is targeting investors who are looking for secure and profitable investment options in the Kenyan market.
The bidding process for this Treasury Bond is unique and different from the usual auctions. The bidders will not specify the price or yield they are willing to accept for the bond. Instead, they will bid at the average rate of the accepted bids for the original bond auction, which was 17.9%. This rate will then be adjusted for accrued interest, ensuring that investors receive a fair return on their investment.
CBK has set the value date for this bond on December 11, 2023, with the closing date set for December 6, 2023. This gives potential investors a limited window to participate in the auction. Bids will be allotted on a first-come, first-served basis, encouraging prompt action from interested parties.
The bond offers an attractive yield of 17.9%, which is higher than the average inflation rate of 12.7% in Kenya. The higher the yield, the greater the potential return, making this Treasury Bond a lucrative option for investors. The bond also has a low-risk profile, as it is backed by the government and has a fixed interest rate.
The adjusted average price per Ksh.100 is 101.3%, which means that investors will pay slightly more than the face value of the bond.
However, this price also reflects the accrued interest that the bond has earned since its initial issuance. The bond has a coupon rate of 17.9%, which is the interest rate that the bond issuer, in this case, the CBK, will pay to the bondholders. This rate, coupled with the adjusted average price, provides a comprehensive picture of the potential return on investment for this Treasury Bond.
The CBK is offering this bond as part of its efforts to raise funds for the government’s budgetary needs and to manage the public debt.
The bond also helps to develop the domestic capital market and to provide a benchmark for other securities.