The Central Bank of Kenya (CBK) has launched a Sh50 billion tax-free infrastructure bond with a 25-year maturity, aiming to finance transport, water, and energy projects. The amortised bond, bearing a 12.2% coupon rate, began trading on Friday with an auction closing on March 19, 2019, according to the CBK's prospectus.
Investors can subscribe between Sh100,000 and Sh20 million, with half the principal redeemable in March 2034 and full repayment scheduled for February 2044. The CBK confirmed proceeds will target partial funding of infrastructure initiatives in key sectors.
This follows strong demand for short-term debt instruments, as evidenced by the February 20 auction where five-year and 10-year Treasury bonds attracted Sh78.3 billion in bids against a Sh50 billion target. Market analysts noted challenges in long-tenor bond performance, citing significant Treasury bill redemptions during July-December 2018.
The government's net domestic borrowing for the first half of fiscal year 2019 reached Sh58.85 billion, below the pro-rated target of Sh139.5 billion. This prompted recommendations to blend short- and long-term bonds to boost domestic financing, as highlighted by Genghis Capital in a recent analysis.
The latest offering mirrors a November 2018 20-year infrastructure bond that also targeted Sh50 billion for similar sectoral projects.
