Investors avoided Kenya’s auction of a 6-year Bond worth Ksh.87.8 billion, as the country walks a tight rope to meet its debt repayment obligation.
The Bond was largely undersubscribed at 60.3 percent, with only Ksh.52.9 worth of bids received, out of which, Ksh.49 billion was accepted.
Kenya had switched the auction of three treasury bills to an Infrastructure Bond issue No. IFB1/2022/6 in a bid to raise Ksh.87.8 billion to meet upcoming maturities.
The underperformance is attributable to investors avoiding the duration risk and tightened liquidity in the money market.
Switching to Infrastructure Bond was informed by the chocking public debt, with view of vacating short-term loans for long term to meet the repayment pressure.
National Treasury Cabinet Secretary Njuguna Ndung’u expressed concerns last week that the country is left with little headroom to keep borrowing as it nears debt ceiling currently at Ksh.10 trillion.
“Right now, we don’t have headroom for accumulating debt, so in a sense, we have to go down into liability management. When you are buffeted by multiple shocks, the reaction is often to use the resources that you have or even borrow to overcome the crisis,” said CS Ndung’u.
In the week ending December 2, 2022, Treasury Bills (T-Bills) were undersubscribed for the first time in five weeks, with the overall subscription rate declining to 82.4%, from the 113.4% recorded the previous week.
The lower subscription is partly attributable to tightened liquidity in the money market with the average interbank rate increasing to 5.1% from 4.8% recorded the previous week.
Investor’s preference for the shorter 91-day paper persisted, with the paper receiving bids worth Ksh.13.2 billion against the offered Ksh.4.0 billion, translating to a subscription rate of 330.7%, up from 316.8% recorded the previous week.
