Business Daily (Nairobi)
David Mugwe
2 December 2011
The Central Bank of Kenya (CBK) has re-opened its paying bond as it seeks to raise Sh10 billion over the next five business days.
The two- year bond which is paying interest at a 22.8 per cent fixed rate every six months over the next two years also has the highest yield at the same rate.
The CBK said the bond, which was first issued last month where the banking regulator was seeking Sh15 billion was only able to net Sh9.98 billion.
“Given that outcome, the bank wishes to give eligible investors another chance to invest in the bond targeting to raise Sh10 billion over the period of Tap sales,” said the CBK in a statement.
The bond was reopened on Wednesday and will close next Thursday.
Alex Muiruri, a fixed income sales trader at African Alliance Investment Bank said that the bonds coupon is the highest among the fixed rate bonds that the Central Bank has sold to investors over the past 10 years.
“Interbank rates have come slightly down meaning that liquidity is coming back into the market and they do want to mop up the excess,” said Mr Muiruri.
Interbank rate
On Thursday, the CBK quoted the interbank rate at 30.3434 per cent down from 33 per cent during the third week of November.
Results for the reopened 12-year infrastructure bond that is paying interest at 12 per cent — much lower than the 2 year bond — which was released by the banking regulator yesterday show that it is yielding 16.64 per cent, also lower than the two- year bond. A 16.64 per cent yield would mean that an investor would give the Central Bank Sh84,384 but received Sh100,000 after the bond matures.
The 12- year bond Tap sales received an 82 per cent subscription rate and the banking regulator was able to get Sh224.50 out of the Sh272.75 million it was seeking.
Mr Muiruri said the fact that longer term bonds were yielding less means that the Central Bank does not expect inflation to stay at its high levels and therefore was keeping longer term interest rates lower. Yields on the 182 Treasury Bill also edged up to 16.543 per cent from 16.471 per cent in the last auction which was able to get Sh2.1 billion compared to the Sh3 billion the banking regulator was seeking.
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