NAIROBI (Xinhua) --
Kenya’s bid to put most of its domestic debt in long-term
government securities is facing challenges as investors in
search of higher yields shun Treasury bond for bills.
Investors for the
better part of this year have kept off T-bonds, with most offers
ending up being undersubscribed as compared to Treasury bills.
In April, the Kenyan
government issued a 400 million U.S. dollars bond for budgetary
support, the offer raised 220 million dollars in bids, and only
200 million was accepted by the Central Bank.
Similarly, in May, a
400 million dollars bond attracted bids worth 200 million
dollars, while in June and July; Treasury bonds worth the same
values recorded the worst bids, according to the National
In June, the
government bond attracted only 100 million in bids while in
July, investors put in 130 million in bids.
“The government has
not achieved much in lengthening their liability profile mainly
due to the poor performance of the longer dated bonds in the
auction market,” Cytonn, a Nairobi-based investment firm noted
Monday in a brief.
The government has
been issuing long-term bonds to lengthen the average maturity
time for the total debt portfolio, which stood at 7.1 years as
at the end of the fiscal year 2017/2018, a decline from 7.8
years as at the end of 2016/2017.
“We attribute the
low-performance rate to the relatively flat yield curve on the
long-end making it relatively unattractive to hold longer-term
bonds considering the current uncertainties in the interest rate
environment,” said Cytonn.
This month, the
Kenyan government has issued a new medium-term 10-year Treasury
bond in a bid to raise 400 million dollars for budgetary
With interest rate
standing at between 12.7 percent and 13 percent, which is
similar to those for short-term bills, Cytonn forecasts that the
bond that would be auction later this month would be
The East African
nation’s domestic and external debts currently stand at 25
billion dollars each, following accelerated borrowing.