CBK Raises Sh50.19 Billion as Strong Demand Drives Bond Sale Above Target

The Central Bank of Kenya (CBK) raised KSh50.19 billion in its April reopening of two fixed-coupon Treasury bonds, exceeding its KSh40 billion target as investor demand remained strong. Total bids reached KSh74.89 billion, translating to a bid-to-cover ratio of 1.49 times, showing that the offer was well subscribed.

The reopening covered two bonds: a 15-year FXD1/2020/015 and a 25-year FXD1/2018/025. The longer 25-year bond attracted stronger demand at 2.44 times coverage. However, only 41 percent of bids for this tenor were accepted, indicating that CBK exercised control over pricing.
Both bonds were issued above par.

The 15-year bond was accepted at a yield of 12.19 percent against a coupon of 12.756 percent, while the 25-year bond was accepted at a yield of 12.99 percent compared to a 13.400 percent coupon. Non-competitive bids accounted for KSh9.48 billion, or 19 percent of the accepted amount. The full amount raised was recorded as net new borrowing.

The strong demand comes as the policy rate has declined to 8.75 percent after ten consecutive cuts. This environment has made investors more willing to pay a premium to secure older, higher-coupon government securities.

The outcome gave the Treasury room to raise more funds than planned without accepting higher yields. At the same time, the rejection of more expensive bids, especially on the 25-year bond, shows an effort to maintain borrowing discipline while still taking advantage of strong market demand.