The Central Bank of Kenya (CBK) has reopened two long-term Treasury bonds seeking to raise Sh60 billion from investors to support the government's budget.
The securities, FXD3/2019/015 and SDB1/2011/030, comprise a 15-year and a 30-year fixed-coupon Treasury bond. They have 7.9 years and 14.4 years, respectively, remaining to maturity.
The 15-year bond, which matures on July 10, 2034, carries a coupon rate of 12.34%, while the 30-year bond, whose maturity date is January 21, 2041, has a coupon rate of 12%.
The offer opened on August 27, and investors have until 10 am on September 2 to submit their bids. The auction will be conducted on September 7, with the bonds settling on the same day.
The CBK, which acts as the government's fiscal agent, said the Sh60 billion raised would be used for budgetary support.
The latest offer provides the government with an additional avenue to raise domestic financing while giving investors access to long-term government securities that can be traded or used as collateral.
For competitive bids, investors must apply for a minimum of Sh2 million per CSD account per tenor. Non-competitive bids have a minimum of Sh50,000 and a maximum of Sh50 million.
The CBK has published pricing tables for yields ranging from 11% to 15% for both bonds, allowing investors to determine the prices applicable at different yields.
For the 15-year bond, the CBK says a quoted yield of 12.34% corresponds to a clean price of Sh99.9638 per Sh100. The security carries accrued interest of Sh1.6612 per Sh100.
The central bank's prospectus gives a dirty price of Sh101.6250 at the 12.34% yield after accrued interest is added to the clean price.
For the 30-year bond, accrued interest stands at Sh0.9231 per Sh100. At a quoted yield of 12%, the clean price is Sh99.9774, giving a dirty price of Sh100.9005 after accrued interest.
The CBK said successful investors would receive details of the amount payable through the DhowCSD Investor Portal or application under the transactions section on September 4.
Investors who fail to make payments may be suspended from participating in subsequent government securities investments.
The reopening comes against a backdrop of continued reliance by the government on domestic borrowing to finance its budgetary needs.
Treasury bonds remain a key component of Kenya's domestic debt market, allowing the government to raise funds while spreading repayment obligations over several years. For investors, the securities provide fixed coupon payments and can be traded in the secondary market.
The two reopened bonds will be listed on the Nairobi Securities Exchange, while secondary trading in multiples of Sh50,000 will begin on September 7.
The securities will also qualify for statutory liquidity ratio requirements for commercial banks and non-bank financial institutions in accordance with the Banking Act.
Investors can pledge the bonds as collateral when seeking loans from regulated financial institutions.
The CBK has also retained the option of rediscounting the securities as a last resort. The rediscount rate will be set at 3% above the prevailing market yield or coupon rate, whichever is higher.
The central bank said it reserves the right to accept bids in full or in part or reject applications altogether without providing a reason.
The bonds may also be reopened again in future, potentially allowing the government to raise additional funds through the same securities.
With the latest Sh60 billion offer, the government is continuing to tap the domestic capital market as it seeks to meet its financing requirements while managing the cost and maturity profile of public debt.