Kenya rejected 61 percent or 380 million U.S. dollars of bids offered by investors for two five-year Treasury bonds it floated this month as appetite from commercial banks soared.

bondThe Central Bank of Kenya (CBK) had mid-month put up for sale the bonds worth 291 million U.S. dollars for budgetary support as the government sought cheaper funds from the public.

The bonds were up for sale from March 12 to 21 at the CBK and were later to be listed at the Nairobi Securities Exchange’s secondary market from March 28.

The CBK received bids worth 304 million dollars for the FXD2-2014-5 bond while the second FXD3-2013-5 attracted 320 million dollars, bringing the total to 624 million dollars.

However, the bank absorbed only 244 million dollars from investors’ bids, with the money being 84 percent of the amount it had sought. From the first bond, the ban accepted 126 million dollars and from the second 118 million dollars.

“The weighted average rate for successful bids was 12.4 percent for the FXD2/2014/5 Bond and 11.8 percent for the FXD3/2013/5 Bond,” said the apex bank Thursday in auction statement.

Analysts noted that the bonds were massively oversubscribed due to increased uptake from banks as they seek to make up for interest rate caps introduced in the third quarter of last year.

Kenya Bankers Association (KBA) chief executive officer Habil Olaka on Wednesday said lenders are currently diverting more funds to Treasury bills and bonds and other opportunities in the forex market rather than lending to borrowers, as they consider government debt less risky and more profitable in the wake of the rate capping law.

The association has intensively lobbied the government against the law.

Olaka noted Wednesday the legislation is hurting low-income borrowers hence defeating its intended purpose. Enditem

Source: Bedah Mengo, Xinhua/