Central Bank of Kenya
Genghis Capital

Treasury opens Sh50bn tax-free infrastructure bond

Central Bank of Kenya (CBK) has opened sale of a 25-year amortised bond to raise up to Sh50 billion with proceeds expected to fund infrastructure projects.

The tax-free bond, with a coupon of 12.2 per cent, started selling on Friday with auction set to close on March 19, according to prospectus the CBK released.

The redemption date is February 2044 but half of the outstanding principal amount will be paid out in March 2034. Investors are allowed to lock in between Sh100,000 and Sh20 million.

The CBK says the proceeds of the bond will be used for partial funding of infrastructure projects in transport, water and energy sectors.

The offer comes at a time market has been seen oversubscription in short-term papers. The five-year and 10-year Treasury bonds offered for the February 20 auction received Sh78.3 billion in bids against an advertised amount of Sh50 billion, recording a performance of 156.5 per cent.

The government’s net domestic borrowing closed the first half of fiscal year at Sh58.85 billion against a pro-rated target of Sh139.5 billion as per budget review and outlook paper estimates.

Performance has been derailed by longer tenor bond issues together with significant Treasury bill redemptions in the July-December period, according to Genghis Capital, which last month tipped the Treasury to start blending both short- and long-term tenor bonds to spur domestic borrowing.

The last bond with a long tenor was a 20-year infrastructure bond issued last November targeting Sh50 billion. This went towards partial funding of infrastructure projects in transport, water and energy sectors.

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