Connect with us

General News

Government to tap Sh50 billion bond :: Kenya

Published

on

Loading...

[ad_1]

CS Henry Rotich (PHOTO: Standard)

Treasury’s plan to tap Sh22.4 billion through the issuance of long-term infrastructure bond will raise Kenya’s domestic debt to over Sh2.5 trillion.

The latest bond issue comes months after the poor performance of an earlier infrastructure bond, which was under-subscribed at 80.787 per cent. “The acceptance rate was encouraging and stands at 55.177 per cent compared to the Infrastructure bond issued in January,” Standard Investment Bank said.

ALSO READ:

Safaricom’s mobile loan terms stir online debate

The government had resisted pressure to increase the price of the two-decade bond and decided to take half of the money on the table. But it has come back willing to take up a higher rate. The Central Bank of Kenya  (CBK) wanted to raise Sh50 billion on the 20-year bond but has only accepted Sh27.5 billion.

The government had offered a coupon rate of 11.9 per cent, but market forces managed to push the rate to 12.2 per cent.

Analysts had questioned the pricing, given that a shorter-term bond was already trading at 12.7 per cent. “The 15-year bond is trading above 12 per cent in the secondary market yet the coupon for this 20-year bond is 11.9 per cent, they needed to compensate for the additional period,” argued market analysts.

Analysts had predicted that CBK would inevitably issue a new bond, which explained why the market was bullish to bid at a weighted average of 12.2 per cent.

Kenya’s domestic bond market has become the best bet for banks ever since the rate cap was introduced, which made credit to private sector risky.

Loading...

Your opinion is valuable. Take this quick survey to help us improve the website and content

For every Sh3 that banks advanced as loans, Sh1 went to the Government, while the remaining Sh2 were shared among manufacturers, real estate developers, farmers, mining companies, transporters, and the 8.7 million private households.

Despite the fact that all banks are literally begging to lend to the Government, the rates on offer have not come down.

When President Mwai Kibaki came into power in 2003, banks invested in Treasury Bills and Bonds at terms spelt out by Treasury.

ALSO READ:

CBK penalty pushes banks to raise vigilance

Would you like to get published on Standard Media websites? You can now email us breaking news, story ideas, human interest articles or interesting videos on:



[ad_2]

Source link

Loading...
Advertisement
Loading...
Loading...

Facebook

Loading...

Trending