Kenyan Treasury Relies on Short-Term Bond Reopenings to Raise Ksh 222 Billion

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The National Treasury in Kenya has utilized multiple reopenings of short-term bonds to secure Ksh 222 billion since May. By opting for bonds with durations between two and five years, the government has been able to take advantage of elevated interest rates of nearly 18 percent. This approach allows the Treasury to avoid committing to high long-term interest rates. The strategy of reopening existing bonds has proven successful, with substantial amounts raised from investors.

Key Points:

  • The Kenyan National Treasury has raised Ksh 222 billion since May by reopening short-term bonds with durations between two and five years.
  • These bonds are offering interest rates of nearly 18 percent, approximately four percentage points higher than those demanded for similar durations three months prior.
  • Among the bonds being revisited is a 10-year paper initially issued in August 2016, which has three years remaining until maturity.
  • This bond, which initially raised Ksh 18.3 billion seven years ago, was reopened in July, raising an additional Ksh 15.7 billion.
  • A three-year bond initially sold in May raised Ksh 20.3 billion and was tapped thrice before the end of June, resulting in an additional Ksh 56.4 billion for the exchequer.

Analysis: The National Treasury’s approach of reopening short-term bonds has proven to be a successful strategy for raising substantial funds. By leveraging the current market conditions with elevated interest rates, the government has been able to avoid committing to long-term rates. This approach demonstrates a prudent management of debt and an awareness of market dynamics. As aggressive bidding continues and the government signals reduced net domestic borrowing, it will be interesting to observe how external financing flows into the country and influences market dynamics.

BDA

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