Treasury hits year target as bonds appetite grows

The Treasury last week achieved its domestic borrowing target of Sh409 billion for the 2019/2020 fiscal year after taking up a net of Sh15.7 billion in June bond and bills auctions amid heavy investor appetite.

The target had initially been set at Sh389 billion but was revised upwards by Sh20 billion as the government’s need for money rose due to factors such as Covid-19 and the locust outbreak, with lower than expected tax collection.

Having largely kept ahead of the borrowing target for much of the year, the Central Bank of Kenya (CBK) was able to take advantage of the reduced pressure to lengthen the maturity profile of domestic debt to about 5.7 from 4.1 years two years ago.

“The share of T-bills was rather high, and, as a matter of policy, we needed to reduce it to increase the average time to maturity of the overall portfolio, which is what has happened. It is one of the successes of this fiscal year,” said CBK governor Patrick Njoroge in a briefing last Friday.

Overall, the share of domestic debt held in form of the short-term Treasury bills is now at 28.9 percent, down from 34.5 percent a year ago, while that held in the longer-dated bonds stands at 69.1 percent, up from 62.8 percent a year ago.

Going into June, the Treasury had surpassed the original target, needing only to take up a net of Sh15.7 billion to hit the fresh one.

In a heavily liquid market, investors bid a total of Sh224 billion in the four weekly T-bill auctions in June, from which the central bank took up less than a third at Sh69.1 billion.

Matched against maturities of Sh71.8 billion, it meant that there were net repayments on these instruments, although some of the 364-day maturities were rolled over in the switch-bond sale earlier in the month.

On the month’s Sh40 billion bond sale, the government made a net borrowing of Sh18.4 billion, having taken up Sh49.3 billion against maturities of Sh30.9 billion.

The issue attracted bids worth Sh105.1 billion, underlining the heavy liquidity in the market.