The Central Bank of Kenya (CBK) is inviting investors to buy a five year treasury bond with an average interest payment of 11.49% per annum. The KSh25 billion bond was initially auctioned on 13th December whereby investors raised KSh28.5 billion.
Treasury only took up KSh18.7 billion of the funds raised
and rejected the rest of the bids which demanded exceedingly high interest
payment. The agency is back in the market seeking to collect KSh9.7 billion
from the five year government bond that will be on sale for two days from 17th to 19th December.
Investors are seeking high interest payment on bonds
following the recent removal of the rate cap law. Banks which heavily invested
in government securities during the lending cap period are now putting their
funds in the private sector where they can generate higher returns.
Additionally, bond buyers are now drawn to short term bonds
as they expect interest rates to go up. Yields on three months and six months treasury
bills improved by 0.3 and 0.4 percent respectively in November.
Sterling Capital Head of Research Renaldo D’Souza told Citizen Digital that Investors are confident that interest rates will go up and are therefore reluctant to invest in long-tenured bonds.