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Treasury seeks additional Sh24b in infrastructure bond tap sale

The Treasury has opened a tap sale for this month’s 12-year infrastructure bond, seeking an additional Sh24 billion from the issue.

The move by Treasury was widely expected by players in the money market, given that the CBK had only taken up Sh6 billion in the initial sale out of offers of Sh35 billion last week’s initial sale.

READ: Treasury rejects costly money with Sh6 billion uptake in latest auction

The bond is targeting Sh30 billion to go towards funding of infrastructure projects in roads, energy and water sectors.

The tap sale closes on Thursday—or earlier if the target amount is achieved— with bids priced at 13.55 per cent, being the rate for the accepted offers in the initial sale.

“Bids shall be priced at the weighted average rate of the accepted bids for the initial bond auction and adjusted for accrued interest,” CBK said in a notice on Tuesday.

Analysts expected the move to return to the market for a tap sale, given that the government is under pressure to meet its budgetary commitments with both domestic and foreign borrowing so far behind target for the fiscal year.

The Kenya Revenue Authority (KRA) has also missed its first half of 2016/2017 financial year revenue collection target by 3.2 per cent and is expected to miss its overall revenue collection target of Sh1.5 trillion for the current financial year.

“We (therefore) expect the government to come under pressure to borrow from the domestic market to meet the high level of debt maturities, which may result into an upward pressure on interest rates,” said Cytonn Investments in a weekly note.

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