Kenya will offer an amortised one-year Treasury bond for up to Sh20 billion during its monthly auction on October 21, the Central Bank said. It is rare for Kenya to sell one-year bonds which are amortised, and suggests the government wants to stagger the repayments due to worries that it will have too much debt maturing in the same period in 2016.
The country has been paying higher yields on debt after short-term interest rates jumped to above 21 per cent last week, mainly due to the central bank’s tightening stance.
The amortized bond will be on sale until October 19, the Central Bank said, and the funds from the sale will be used for budgetary support. Unlike regular one-year bonds where all the debt is repaid at the end of 12 months, with Kenya’s amortized bond 30 per cent of the outstanding capital will be redeemed after six months, while 50 per cent will be repaid on 26 July 2016.
Alex Muiruri, a fixed income analyst at Kestrel Capital, said the government was likely to expect lower interest rates on
the amortized bond than on the 364-day Treasury bills, which were sold with a yield of 21.50 per cent at auction last week.
“It’s a smart move on the side of the government but I think the pricing will be the same as the 365-day bonds. It won’t change,” he said.