Central Bank of Kenya
Genghis Capital

Five-year bond interest declines

The weighted average yield on the five-year paper fell one percentage point as that on 10-year Treasury bond dipped slightly at the auction last Wednesday, with the Central Bank of Kenya (CBK) raising just over half of the amount it offered investors. The yield on five-year paper fell to 11.378 percent compared with 12.394 percent at previous primary sale in March last year while that for 10-year bond dipped marginally to 12.463 percent from 12.580 percent at the last sale in December.CBK, the government fiscal agent, said it received bids worth Sh41.93 billion out of the Sh50 billion it offered for five-year bond, a sign of tightening liquidity a week after banks were to meet statutory cash reserve ratios and tax obligations for corporates fell due.The bank, however, rejected more than half of the bids for the five-year bond, accepting only Sh20.59 billion at a weighted average of yield of 11.304 percent.Subscription for the 10-year paper came in at Sh36.33 billion of the Sh50 billion offered, with CBK absorbing Sh32.81 billion at an average yield of 12.299 percent.The CBK has resorted to shorter-tenure debt offerings after faltering, with a 25-year bond in June last year that received Sh10.1 billion out of the Sh40 billion offered, with the bank accepting only Sh5.2 billion for 13.5 percent coupon.“The current pegged rate environment has led to a shortening in duration across the board as witnessed in lethargic uptake of long-end issues in 2018,” analysts at Genghis Capital wrote in a note ahead of the primary bond auction.At the primary sale of Treasury bills on Thursday, bids for the one-year T-bill declined drastically to 84.34 percent of the Sh10 billion on offer from 170.94 percent previously, the CBK said in a separate statement.Subscription to six-month government securities also dipped slightly to 115.73 percent of the Sh10 billion offered from 117.07 percent, the bank said.Sale of 91-day T-bills, however, received a 127 percent subscription of the Sh4 billion auctioned, slightly improving from 121.51 percent the previous week.

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