The 15-year bond drew bids of Ksh34.56 billion, of which Ksh28.60 billion was accepted. The 20-year bond drew Ksh46 billion in bids, with Ksh28.90 billion accepted. Bid-to-cover ratios were 1.21 for the 15-year paper and 1.59 for the 20-year paper, a sign that demand outstripped what CBK took up. Combined, CBK accepted about Ksh7.5 billion above its target.
The 15-year bond (FXD3/2019/015) carries a 12.34% coupon and matures on July 10, 2034, while the 20-year bond (FXD1/2019/020) carries a 12.873% coupon and matures on March 21, 2039. Because these are reopening’s, investors buy the remaining time to maturity, about 7.8 years and 12.5 years, rather than a fresh 15- or 20-year term.
The 15-year bond was first issued in 2019 with a face value of Ksh50.6 billion, which has grown to Ksh161 billion. The 20-year bond has grown from Ksh9 billion to Ksh209.8 billion before this sale.
The coupon is the fixed rate paid on face value, while the actual return depends on the price at which a bid is accepted. CBK uses a multi-price auction, so successful bidders can receive different yields. Accepted average yields: about 12.73% for the 15-year and 13.60% for the 20-year. Verify on CBK’s results notice before publishing. With inflation at 6.8%, the fixed coupons on offer are well above the current cost of living increase.
Non-competitive bids start at Ksh50,000, which suits most retail investors, while competitive bids start at Ksh2 million per tenor. Interest is subject to 10% withholding tax. Secondary trading in both bonds begins on October 5 in multiples of Ksh50,000.
The money goes to budgetary support, and strong demand for long-dated paper shows investors are still willing to lend to government for 8 to 12 years despite rising inflation.
