CBK reopens 5-year bond, tipped to reject expensive bids

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According to analysts, investors will likely get a limited premium on the first coupon on the reopened 5-year bond currently on sale, as Central Bank tilted to continue to reject expensive bids.

This is an offer that was reopened to raise Sh50 billion. In the auction, the government collected Sh20.8 billion from bids worth Sh34.53 billion at an average of 11.67 percent.

The reopening of the bond is set as a move to raise additional funds as coronavirus continues to disrupt the economy hitting tax collection, among other issues such as maturity of debts.

“While room for aggressive bidding may be limited on the reopened five-year bond, we anticipate the paper could still sell at a discount within the range of 11.75 to 11.85 percent,” said NCBA

“Appetite may remain healthy although there is a fair chance of under subscription, the liquidity position notwithstanding.”

Analyst at AIB Capital believes that CBK will likely reject overly aggressive bids, something that happened on the first sale of the bond earlier this month.

 “We advise investors to bid within the range of 11.7 to 11.85 percent for the five-year bond as CBK is likely to reject aggressive bids,” Investment Bank said in a note. 

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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