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Treasury back in market for Sh14bn after initial bond flop



Capital Markets

Treasury bill maturities during the week stood at Sh20.4 billion. FILE PHOTO | NMG 

The Treasury is back in the market with a Sh13.8 billion tap sale for this month’s bond issue, after the initial sale was undersubscribed by 28 percent.

The sale of the Sh40 billion 10-year Treasury bond last week was hit by tight liquidity in the market. It attracted bids worth Sh28.9 billion with the central bank accepting bids worth Sh26.2 billion at an average interest rate of 12.5 percent.

They are now back in the market to fill the gap, with the tap sale opening yesterday and running until December 27.

A tight money market saw the indicative interbank rate rise to a three year high of 11.3 percent at the end of last week but cash injections through a maturing two-year paper on Monday eased the situation a bit, pulling the rate back to 10.1 percent.

“Bids shall be priced at the weighted average rate (12.502 percent) of the accepted bids for the (initial) bond auction dated December 17 and adjusted for accrued interest,” said CBK in a statement yesterday.

The Treasury has had a hard time raising bids for securities auctions in recent weeks, due to the scarcity of liquidity.

The short-term Treasury bills also underperformed in their auction last week, attracting bids worth less than a quarter of the targeted Sh24 billion across the three tenors.

Investors bid just Sh5.7 billion for the T-bills which translates to an average performance rate of 23.8 percent, with CBK accepting bids worth Sh5.4 billion.

Interest rates remained largely unchanged at 7.34, 8.24 and 9.59 per cent respectively for the 91, 182 and 364-day papers.

The low bidding on both the T-bills and the bond translated into a net payment position for the government at the end of the week.

On the bond, new borrowing amounted to just Sh681 million given the maturities of Sh25.5 billion that need to be rolled over.

Treasury bill maturities during the week stood at Sh20.4 billion, meaning that the government ended up making net payments of Sh14.98 billion.