As the first quarter of the year wraps up, the National Treasury of Kenya is looking to raise 70 billion Kenyan shillings in the sale of its April bond, including a three-year paper aimed at banks whose government debt holding have fallen in recent weeks.
Kenya’s April bond consists of two tranches of three and fifteen-year paper that could bring in 40 billion and 30 billion shillings respectively. The three-year paper is on sale until April 5 and the fifteen-year trance runs until April 19. Both are meant to go towards financing ordinary budget financing.
In the last two years, the government of Kenya has concentrated on selling its long-dated papers in order to avoid refinancing pressures and to lengthen the maturity date of its domestic debt. This has had an adverse effect on banks that typically prefer short-dated papers. Meanwhile, pension funds have benefited from the steady supply of long-term bonds that fit into their own futuristic plans. Consequently, government debts at banks have failed from 54.4% in March 2020 to 49.2% in February 2022 while debts held by pension funds have gone up 29% to 31.9% in that same time.
The five largest sectors that are lenders to the government are banking, pension funds, insurance firms, parastatals and retail investors. As a result, lenders are expected to provide the majority of the demand for short-dated papers, increasing its potential for oversubscription. Yields on both papers will be market-determined and could cause another row between investors and the Central Bank of Kenya over rates.