This archive report was first published on 21 August 2020.
On August 21, 2020, investors showed strong interest in the 11-year infrastructure bond, bidding Sh101.5 billion against the target of Sh70 billion. This gave the Treasury a significant boost in achieving its domestic borrowing target for the current fiscal year.
The Central Bank of Kenya (CBK), the government's fiscal agent, took up Sh78.64 billion from the bids offered by investors, at an average rate of 11.302 percent. Analysts attributed the positive uptake to the bond's tax-free status and the poor performance of equities.
According to Genghis Capital head of research Churchill Ogutu, the uptake was broadly expected due to the tax-free status of the bond and the liquid environment during the sale period. He noted that the bond's tax-free status is a 'no-brainer incentive' to investors.
The government is seeking to finance development projects in the current financial year through longer-dated bonds that have attracted demand due to higher yields. Despite this, the CBK rejected Sh22.83 billion from the auction as the government remains ahead of its domestic borrowing target for the fiscal year.
The government's aggressive borrowing from the domestic market has contributed to its ability to meet its borrowing target. In recent months, the government has carried out tap sales on a Sh40 billion, 20-year Treasury bond and a Sh60 billion bond in three tenors, attracting significant demand from investors.
