Kenya: Bondholders Bid Sh39 billion at the Switch Auction.

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The switch auction, which closed on November 30, 2022 was largely occupied by holders of the two-year bond that matured and served to protect the exchequer from a potential cash shortage at the beginning of 2023.

Only Sh16.8 billion in the FXD1/2021/002 two-year bond was still outstanding as of December 31 according to data from the Nairobi Securities Exchange’s (NSE) secondary bond market. Prior to the switch bond’s issuance, the bond’s initial maturity size was Sh55. 85 billion, which suggests that holders of the paper rolled over payments totalling Sh39 billion to the new six-year infrastructure bond that covered the switch auction.

Holders of 91, 182, and 364-day T-bills were the only ones to swap to the switch bond; the remaining maturities totalled Sh8.3 billion. According to data from the Central Bank of Kenya (CBK), the Treasury will meet redemptions of Sh23.7 billion after accepting bids worth Sh31.4 billion from investors in last week’s T-bill auction.

Currently, the Treasury is seeking Sh50 billion from two re-opened five- and fifteen-year bonds whose auction closes soon. The Treasury had previously deployed switch bonds as an avenue to averting potential liquidity risks in June 2020.

The bond turnover in the domestic secondary market declined by 59.4 percent during the week, ending January 5. In the international market, yields on Kenya’s Eurobonds declined by an average of 12.8 basis points, with 2024 maturity declining by 14 basis points.


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