September bond undersubscribed in tight liquidity

Investors undersubscribed this month’s Treasury bond issue as tightening liquidity resulting from Central Bank’s aggressive mop up weighed on the market.

CBK took up the entire Sh32.6 billion bid by investors, at a rate of 12.5 and 12.6 for the two 15-year bonds that sought to raise Sh50 billion.

“What came as a surprise for us is the decision to take up everything at 12.6 per cent which tell that some people may have bid as high as 13 per cent and they were still accepted,” said Churchill Ogutu, a senior research analyst at Genghis Capital.

Mr Ogutu said the acceptance of aggressive bids may be linked to the fact that CBK is stepping up mopping up liquidity.

On Monday CBK mopped up Sh56.2 billion from the money market through repurchasing agreements (repos).

Jibran Qureishi, the regional economist for Eas the CBK was keeping an eye on the significant amounts of redemptions in government securities, which forced it to clean the plate.

“The two bonds are long term which typically do not attract a lot of attention. The fact that they took all the money can be viewed from the fact that they had over Sh40 billion in redemptions,” said Qureishi.

The two bonds were supposed to meet redemptions of Sh46.2 billion. The CBK has faced considerably high domestic debt redemptions in September 2019 at Sh123 billion compared to Sh92 billion in August.

So far the CBK has auctioned T-Bills worth Sh72 billion in September with a subscription rate of 73.2 per cent (Sh52.7 billion) with Sh47.5 billion accepted.