CBK floats 25-year bond, the longest tenor since 2014

The Treasury has floated a 25-year Treasury bond as it looks to lengthen the maturity profile of domestic debt, taking advantage of reduced borrowing pressure after meeting the debt target a month to the end of the fiscal year. The Sh40 billion bond, which is the longest issued by the government since September 2014, goes on sale until June 19, with a coupon of 13.4 per cent.

The average time to maturity of domestic debt was at five years at the beginning of 2017 but has since then fallen to just over four years due to increased issuance of shorter tenor Treasury bonds in a bid to keep a lid on yields. Analysts said that achieving the domestic debt target before the end of the final quarter of the fiscal year (ending June 30) would offer Treasury a chance to issue one or more special long-tenor amortised bonds that would lengthen the maturity profile.

“The Treasury opted to propose the issuance of a new 25-year bond in June 2018, targeting Sh40 billion, with a coupon of 13.4 per cent—the longest duration yet since September 2014,” said Kestrel Capital in a debt bulletin. READ: Treasury bills oversubscribed at 118pc in first three months “By April, the average duration of all government securities was 4.15 years (T-bonds only; 6.06 years), effectively showing no progress from 4.14 years and 7.25 years respectively in June 2017.”

In May, the Treasury issued a 15-year bond and in April it had issued a bond consisting of a new 20-year tranche and a re-opened 15-year paper. CBK Governor Patrick Njoroge said at the end of last month that the government had taken up a total Sh282.1 billion in net borrowing from the domestic market by May 28, against a target of Sh268.7 billion for the fiscal year.

This article provided by NewsEdge.