NAIROBI, Tuesday
The yield on Kenya’s upcoming nine-year infrastructure bond is in line with the market, but there are slight concerns about the ability of the Central Bank to raise the planned sum in one go, traders said. The Government plans to issue the Sh31 billion ($386 million) infrastructure bond with a coupon of six per cent redeemable over six, seven and nine years.
"It (the yield) is in line with the market. The Central Bank has been in the driving seat of lowering rates so they couldn’t issue a bond with a higher yield than that of similar bonds in the secondary market," said Mr Duncan Kimani, head of fixed income at Bank of Africa.
Infrastructure bonds have been popular in the country’s debt market, ever since their introduction last year, mainly because earnings on the bonds are tax exempt to encourage investors.
This will be Kenya’s fourth infrastructure bond. The last issue in February was worth Sh14.5 billion and the inaugural one early last year was worth Sh18.5 billion.
Mr Jackson Kitili, Central Bank’s director of monetary operations and debt management, said the sale period of the bond would be known by the end of the week.
"We want Sh31.6 billion and we are going to have it amortised at sixth, seventh and ninth year. Most of it will be at the sixth year," Kitili said. "There is a proportion that will be amortised. It’s 43 per cent for the first one, 26 for the second one and final one is the balance, which is nine years."
Secondary Market
"Given that we have witnessed reduced
activity in the secondary bond market trading in the recent past, I have a feeling that the issue is bigger than what ... the market is prepared for right now," Peter Njuguna, head of trading at Commercial Bank of Africa, told Reuters.
"I am not saying that it will not be fully subscribed. I think, given that the liquidity is still there in the mar-ket, we will wait and see how the subscription will be."
Kimani said the market had grown by leaps and bounds after the debut infrastructure bond and that it could handle the upcoming issue, which amounts to all of the government’s planned borrowing for the infrastructure this fiscal year.
