Next month, the National Treasury will sell bonds to raise Ksh. 60 billion from the local credit market.
Three papers, including two reopened 10 and 15-year issues with 4.9 and 12.3 years to maturity, have been offered for investor bids by the Central Bank of Kenya (CBK).
In the dual auction, a fresh 25-year paper has also been made available to investors.
The CBK expects to raise Ksh.40 billion from the two reopened papers, which will be available until October 4, and another Ksh.20 billion from the new 25-year bond, which will be available until October 18.
Against investor pressure for higher pay out, the reserve bank will seek to keep yields on the two re-opened papers around the bonds coupon rates of 12.966 and 12.756 percent per annum.
Meanwhile, at the end of the auction, the yields on the new 25-year paper will be determined by the market.
CBK and the National Treasury will bet on the auction meeting its target after falling short in both the July and August bond auctions due to below-par investor participation.
For example, the August bond sale was 92.27 percent subscribed, with investor bids totaling Ksh.46.1 billion against a target of Ksh.50 billion.
Investor bids on October’s bond issues are expected to favor the shorter maturing, re-opened 10 year paper, as investors weigh duration risks and prefer short-term instruments.
Nonetheless, the new 25-year paper is expected to attract investor interest due to its market-determined coupon rate, which allows purchasers to increase bond returns.
The proceeds of the bond sale are expected to go toward government budgetary support under the government’s domestic borrowing program for 2022/2023.