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Financial markets

Government Nets Sh179.8 Billion from Oversubscribed Bond Sale

Strategic Insights

— 2 min read

The government's recent infrastructure bond sale has resulted in a significant financial boost, with investors oversubscribing the tap sale by a factor of four times over. The sale, which targeted Sh50 billion, attracted bids worth Sh207.45 billion, leaving the Central Bank of Kenya (CBK) with a total of Sh274.8 billion from the August bond. This development comes as the government struggles to meet its high domestic borrowing target of Sh635.5 billion for the current fiscal year and fund elevated debt service costs in August.

Key Takeaways:

  • The tap sale of the August infrastructure bond attracted bids worth Sh207.45 billion, exceeding the target of Sh50 billion by a factor of four times over.
  • The sale resulted in the government netting Sh179.8 billion, with the CBK retaining the option to close the sale early once its target was achieved.
  • The primary sale of the bond, which ran between July 21 and August 13, raised bids worth Sh323.43 billion, out of which the CBK took up Sh95 billion.
  • The 15-year and 19-year infrastructure bonds were sold at discounted prices of Sh98.19 and Sh94.59 per bond unit of Sh100, respectively.
  • The government used the Sh95 billion raised in the primary auction to settle a Sh94.68 billion maturity on a two-year bond.
  • The CBK also retains the option to close the tap sale early once its target is achieved, with the sale currently open for just 24 hours.
  • The sale was seen as a necessity to bring in new borrowing for the month, with the government under pressure to meet its high domestic borrowing target.
  • The government is also paying Sh87.2 billion in interest on its portfolio of bonds and Sh83.4 billion in Treasury bill maturities this month.

Statistics:

  • The government netted Sh179.8 billion from the tap sale of the August infrastructure bond.
  • The primary sale of the bond raised bids worth Sh323.43 billion.
  • The CBK took up Sh95 billion from the primary sale, rejecting offers it considered expensive.
  • The sale of the 15-year and 19-year infrastructure bonds resulted in discounted prices of Sh98.19 and Sh94.59 per bond unit of Sh100, respectively.
  • The government used the Sh95 billion raised in the primary auction to settle a Sh94.68 billion maturity on a two-year bond.
  • The CBK retains the option to close the tap sale early once its target is achieved.
  • The government has a high domestic borrowing target of Sh635.5 billion for the current fiscal year.
  • The government is paying Sh87.2 billion in interest on its portfolio of bonds and Sh83.4 billion in Treasury bill maturities this month.

Sources:

  • "Government nets Sh179.8 billion from oversubscribed bond sale" (Business Daily, [date not specified])
  • "Central Bank of Kenya (CBK) Annual Report 2022" (Central Bank of Kenya, [date not specified])
  • "Treasury aims to raise Sh635.5 billion for 2023/24" (Business Daily, [date not specified])

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