The Central Bank of Kenya (CBK) is seeking Sh50 billion from two re-opened bonds as the government seeks to round off domestic borrowing for the financial year running to June 30.
The first of the re-opened bonds is a fifteen-year paper first sold in 2020, and which has 9.7 years left to maturity. The paper carries a coupon/fixed interest rate of 12.756 percent and matures in February 2035.
The second re-opened bond is a 30 year paper –the longest ever issue of government securities— first sold in 2011, and which carries a coupon of 12 percent.
The auction of the two papers commenced on Tuesday and is expected to run until Wednesday next week.
The sale comes against the backdrop of falling interest rates on government securities including Treasury bills and bonds with the return on the one-year paper for instance falling to single digits last week.
Both bonds on sale are expected to sell at premiums to cover interest accrued from their last coupon payments.
The re-opened 15-year paper for instance attracts accrued interest of Sh4.4155 per Sh100 while the re-opened 30-year bond has accrued interest of Sh4.3846 per Sh100.
The 15-year paper traded at a slight discount in the secondary market on Tuesday at a price of Sh99.6775 per Sh100.
The 30-year paper which was dubbed the savings bond at issuance due to its lengthy tenure meanwhile traded at a larger discount of Sh89.6598 per Sh100 on the Nairobi Securities Exchange (NSE).
Falling interest rates have allowed the government to borrow from the domestic credit market at relatively cheaper rates easing pressure on debt servicing costs.
The National Treasury domestic borrowing has run ahead of target in the current fiscal cycle on sustained participation by investors who have rushed to lock in returns as yields are projected to fall further in upcoming months.
CBK cut its benchmark rate for a sixth consecutive time on Tuesday, lowering the Central Bank Rate (CBR) from 10 percent to 9.75 percent. The cut signals lower domestic interest rates in coming months including returns from government securities.​
