NAIROBI, Kenya, Sept 2 – The government will reopen two 15 years bonds to raise Sh50 billion for budgetary support this month.
The two medium-tenor bonds are also expected to help reduce the maturity risk profile government debts.
Analysts from Cytonn Investments say they expect the bonds to be oversubscribed as per recent trends, driven by the perception that risks may not be adequately priced on the longer end of the yield curve.
Currently, bonds with similar tenors are trading at yields of between 11.9 percent and 12 percent.
Last month, the government issued a 10-year bond and re-opened a 20-year bond (to raise a total of Sh50.0 billion for budgetary support.
“The accepted yields for the issue came in at 11.6 percent and 12.7 percent for the (FXD 3/2019/10) and (FXD 1/2019/20), respectively, in line with our expectations as highlighted in last week’s bidding ranges of 11.5 percent – 11.7 percent and 12.6 percent – 12.8 percent, for the (FXD 3/2019/10) and (FXD 1/2019/20), respectively,” Cytonn says.
The issue was oversubscribed with the subscription rate at 134.9 percent, having received Sh67.4 billion worth of bids against the advertised amount of Sh50.0 billion, with the market biased towards the 10-year bond that had bids amounting to Sh52.8 billion.
This was mainly driven by the perception that risks may not be adequately priced on the longer end of the yield curve, which is relatively flat due to a narrowing spread between the short-term and long-term interest rates.