Bondholders raise Sh39 billion in circuit breaker auction

CBK data shows the Ministry of Finance will disburse Sh23.7 billion after accepting bids for Sh31.4 billion at last week’s treasury bill auction. PHOTO FILE | NMG

Holders of two-year notes maturing on Friday took up most of the swap auction that closed on Nov. 30, serving to cushion the treasury from a potential cash crunch in early 2023.

Data from the Nairobi Securities Exchange (NSE) secondary bond market shows that only Sh16.8 billion was outstanding before the January 9 redemption date from the December 31 two-year bond FXD1/2021/002.

Initially, the bond had a maturity of Sh55.85 billion before the switch bond was issued, which meant paper holders shifted payments of Sh39 billion to a new six-year infrastructure bond that covered the switch auction.

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Meanwhile, holders 91; The 182-day and 364-day treasury bills changed maturities of only Sh8.3 billion to the replacement bond, and the Ministry of Finance is now expected to pay the note holders an amount of Sh23.7 billion.

Holders of 364-day T-bills accepted a maturity change of Sh4.99 billion, holders of 91-day notes changed maturities worth Sh2.57 billion, while holders of 182-day notes did Sh700 million.

According to the Central Bank of Kenya (CBK), the Ministry of Finance will disburse Sh23.7 billion after accepting bids worth Sh31.4 billion from investors at last week’s treasury bill auction.

On November 22, the CBK issued a Sh87.8 billion rollover auction, blocking the initial beneficiaries of the bids to holders with the same amount maturing on January 9 as a hedge against a potential cash crunch at the start of the year.

Cumulatively, the targeted account and bond holders shifted Sh47.8 billion maturities to the six-year infrastructure bond which served to allay fears of an expected cash crunch.

Subsequently, however, CBK invited third parties to bid through a tap sale from which it accepted Sh10.8 billion of the target Sh20 billion.

Currently, the Ministry of Finance is seeking Sh50 billion from two reopened five-year and fifteen-year bonds whose auction closes tomorrow.

The Ministry of Finance previously implemented convertible bonds in June 2020 as a way to avoid potential liquidity risks.

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Bond turnover on the domestic secondary market during the week ending January 5 fell by 59.4 percent.

In the international market, yields on Kenyan Eurobonds fell by an average of 12.8 basis points, with the 2024 maturity down 14 basis points.

CBK notes that yields on 10-year Eurobonds for Ghana and Angola have also declined.

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