The Treasury was expected to go back to the fixed-income market with a tap sale after last week’s infrastructure bond auction failed to absorb all the money investors offered.
In the initial sale of IFB1/2018/20, the Central Bank of Kenya, acting for the Treasury, accepted Sh27.6 billion out of Sh40.4 billion submitted against a Sh50 billion target. The remaining bids were left on the table, setting up the possibility of a follow-up offer on the same terms and conditions.
Investment bank Genghis Capital said it expected the tap sale to clear some of the rejected cash and give another chance to investors who were shut out during the first auction. The firm also said the move could revive activity in the bond market after reduced trading volumes and some jitters the previous week.
Genghis Capital added that investors were likely to position themselves ahead of the possible tap sale on IFB 1/2018/20. The analysts said the proceeds would mainly be used to redeem FXD3/2013/5year, which had an outstanding amount of Sh34.64 billion and was due on Monday.
That redemption, however, would not fully meet the infrastructure funding objective tied to the bond, according to the analysts. They said the release of cash into the market was likely to lift trading in short-dated instruments and support activity at the short end of the yield curve.
The FXD3/2013/5yr paper, with Sh34.64 billion outstanding, was identified as the instrument whose maturity would help drive that expected market response.
