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Kenya’s bid to lengthen domestic debt maturity faces challenges 

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 Treasury.

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 support.

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 undersubscribed.

The East African nation’s domestic and external debts currently stand at 25 billion dollars each, following accelerated borrowing.  



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