Kenyan Investors Shy Away From Lending the Government Billions

As evident from the CBK bid results of the three bonds floated this month, Kenyan investors are reluctant to lend the government the Kshs 50Billion sought amount for budgetary support. 

Investors collectively sought the CBK to pay them 12.45% for the 3-year bond, but the CBK was willing to pay coupons at 11.77%. The investors further needed a 13.89% coupon rate against the CBK set return of 12.3% for the 10-year bond, while on the 20-year bond, they wanted 14.22% against a CBK coupon rate offering of 13.44%. 

The total amount that the investors bid was Kshs 49.12 Billion at the lapse of the bid period. Because of a fall in expectations, CBK was able to accept and collect Kshs 38.52Billion from the three bonds sold to the public, from the targeted 50 billion. This implies a deficit in collections of Kshs 11.48Billion.

Implications to the Government and Investors

The incoming administration or government faces a cash crunch because of the deficit. While Kenyans await to see the financial behavior of the incoming regime, the general outlook of the current national books signals a case of more bonds being floated soon to fund the budget deficit and meet current financial obligations. 

More bonds will likely be available to the general public at a volatile but reasonably good rate. While the rates the CBK in August bonds floated were lower than expected, they were good enough than other unsecured investment options available in the market. 

If you want to take advantage of the upcoming Treasury Bonds, you can check out our article about how to invest in Treasury Bonds as a beginner.