The Central Bank of Kenya (CBK) raised Sh57.5 billion on Wednesday, September 30, from reopened 15-year and 20-year Treasury bonds to fund the government's budget, after investors submitted bids worth Sh80.56 billion against a Sh50 billion target, a performance rate of 161.1%. It was the second month in a row that the Treasury reopened the same two bonds.
The 15-year bond drew bids of Sh34.56 billion, with Sh28.60 billion accepted, while the 20-year bond drew Sh46 billion and Sh28.90 billion was accepted. Bid-to-cover ratios were 1.21 and 1.59 respectively, showing demand outstripped what CBK took up. In total, CBK accepted about Sh7.5 billion above its target.
The 15-year bond carries a 12.34% coupon and matures on July 10, 2034, while the 20-year bond carries a 12.873% coupon and matures on March 21, 2039. Because these are reopenings, 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 coupon is fixed rate paid on face value, so the actual return depends on the price at which a bid is accepted.
Non-competitive bids start at Sh50,000, which suits most retail investors, while competitive bids start at Sh2 million. Interest is subject to 10% withholding tax and secondary trading in both bonds begins on October 5.
