Treasury targets Sh21.7b in T-bond tap issue
National Treasury has re-opened its November bond issue to a tap sale seeking to raise Sh21.65 billion from the market. The sale period which is between November 26 and November 28 will be on a first-come-first-served basis.
“Bids shall be priced at the average rate of the accepted bids for the Treasury Bond Auction value dated 25/11/2019 and adjusted for accrued interest,” said William Nyagaka, Director, Financial Markets.
A tap issue is a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues.
The bonds are issued at their original face value, maturity, and coupon rate, but sold at the current market price. Marshal Nyangor, a financial analyst with Zimele Asset Managers told the Business Hub that the bond could have been undersubscribed, with investors holding back in anticipation that the short-term interest rate will spike after the repeal of section 33b of the Banking Act.
The law introduced on September 14, 2016 stopped banks from charging exorbitant interest rates by capping lending rates to four percentage points above the Central Bank Rate (CBR).
The CBR has remained at nine per cent for most of this year, forcing banks to only lend at a maximum of 13 per cent. Nyagaka said the offer has an adjusted average price of (per Sh100), Sh100.229, and will earn a yield of 12.280 per cent per annum.
He asked investors to ensure they obtain details of amounts payable for successful bids from Central Bank of Kenya on November 29.
They have until December 2, 2pm to make their payment.
“Treasury normally uses these tap sales to pay maturing bonds as well as finance recurrent and development expenditure,” said Nyangor.