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CBK Aims for Sh65 Billion through Reopened Bonds to Address Interest Rate Peaks

The Central Bank of Kenya (CBK) is strategically pursuing funds by targeting to raise Sh65 billion from reopened bonds. This initiative involves reopening a two-year bond alongside the tap sale of five-year and 10-year bonds, prioritizing market accessibility and efficiency.

The CBK’s goal includes raising Sh40 billion from the reopened two-year bond, available for subscription until April 17. This bond, introduced last year, saw success with an interest rate of 16.97 percent.

In addition, the CBK seeks to generate Sh25 billion from the auction of five- and 10-year bonds, with the sale operating on a first-come-first-served basis until April 4 or until the target is met.

Reopening these bonds aligns with the government’s debt strategy while accommodating investor demands. The CBK’s fiscal agent aims to address previously rejected bids totaling Sh37.1 billion, stemming from investors seeking higher interest rates during the recent auction.

Despite fluctuating interest rates, investors are presented with an opportunity to participate in these bonds, with expectations of potential rate declines in the future.

The recent auction witnessed significant investor interest, with total bids amounting to Sh59.7 billion. However, the CBK accepted only Sh22.6 billion, rejecting the rest due to disparities in expected returns.

The CBK’s approach underscores its commitment to stabilizing interest rates and mitigating debt service costs. Recent developments, including the reduction in Eurobond maturity risks and adjustments in net domestic borrowing targets by the National Treasury, further support the CBK’s efforts.

As the CBK implements strategic measures to manage fiscal challenges, stakeholders await the outcomes of the reopened bonds, anticipating their role in reshaping Kenya’s economic trajectory.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

29th March, 2024

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