Kenya opts for cheaper funds from T-bills as it snubs bond bids

Investors at Kenya's debt market this week suffered a blow as Central Bank of Kenya (CBK) rejected costly bids from a 12-year infrastructure bond, opting to borrow cheaply from Treasury bills instead.

The bank had early this month floated the 291 million U.S. dollars Treasury bonds as it sought money to fund projects in roads, water and energy sectors.

Having cancelled the January Treasury bond worth a similar amount due to high bids, analysts had predicted the February bond would be oversubscribed.

"The total number of bids received amounted to 340 million dollars," said the CBK in auction statistics Thursday.

Yields on the bond stood at 13.5 percent, an increase of 2 percent since the last auction of the bond in March 2015.

The apex bank accepted a paltry 58 million dollars out of the 340 million dollars received, with analysts citing the high yield on the paper as the reason for the low absorption rate.

On the other hand, CBK offered 182 and 364 days Treasury bills worth a total of 117 million dollars, 58.5 million dollars for each.

"The total number of bids received was amounted to 240 million dollars representing a 412 percent subscription and 9.6 million dollars representing 18 percent subscription for 182 and 364 days, respectively," said the CBK.

The regulator accepted 194 million dollars from the 182-day bill at 10.5 percent, which was more than twice what it had sought, while for the 364-day bill, the bank accepted all the bids at 10.9 percent.

Cytonn, a Nairobi-based investment firm, noted that the Central Bank is trying to stabilize interest rates in the auction market by rejecting bids that it considers are above the market.

Last week, the CBK Governor Patrick Njoroge said the regulator would not hesitate to cancel auctions whose bids were outside the yield curve and turn down high bids by investors seeking to capitalize on the government's high appetite for funds.

"Some of the prices are way outside the yield curve. There is a feeling that the government has insatiable need to borrow and that is why some of them are bidding on crazy rates. Endit