The Central Bank of Kenya (CBK) accepted Treasury bonds worth Sh8.96 billion in its latest switch auction after investors submitted bids valued at Sh9.08 billion, slightly below the Sh10 billion amount the government had targeted.
The auction for the 15-year FXD1/2018/015 bond recorded a performance rate of 90.81 per cent, with the bids giving a bid-to-cover ratio of 1.01.
In the results released on October 5, CBK said competitive bids accounted for Sh7.04 billion of the amount accepted, while another Sh1.92 billion was taken through non-competitive bids.
The destination bond has 6.6 years remaining to maturity and carries a coupon rate of 12.65 per cent. It is due to mature on May 9, 2033.
CBK said the market weighted average rate for the auction stood at 12.6126 per cent, while the weighted average rate for accepted bids was 12.6112 per cent.
The price per Sh100 at the average yield was set at 105.0721, according to the auction results.
The transaction involved the exchange of two source bonds for the destination security. The source bonds were FXD1/2024/003, with ISIN KE8000006323, and FXD2/2013/015, with ISIN KE4000003808.
The destination security was FXD1/2018/015, identified by ISIN KE5000008432.
During the switch, CBK reported that securities worth Sh8.779 billion were exchanged from the two source bonds.
A Treasury bond switch gives investors holding existing government securities an opportunity to exchange them for another Treasury bond. The arrangement also helps the government manage when its debt falls due while giving investors another government security in which to hold their funds.
The latest transaction forms part of the government's domestic borrowing programme, through which Treasury securities are sold in the local market to raise money for government spending and help manage existing debt obligations.
CBK acts as the government's fiscal agent in the domestic securities market, conducting auctions for Treasury bills and bonds and releasing results showing investor demand, the amounts offered and accepted, and the yields attached to successful bids.
The latest figures show that investors placed bids equivalent to 90.8 per cent of the Sh10 billion target. Of the Sh9.08 billion worth of bids received, CBK accepted nearly 98.7 per cent, amounting to Sh8.96 billion.
The 12.65 per cent coupon rate on the destination bond represents the interest attached to the security, while the 12.6112 per cent weighted average accepted yield shows the rate linked to the bids that were successful in the auction.
The auction results were signed by CBK Director of Financial Markets David Luusa.
Alongside the switch results, the Central Bank also issued details on forthcoming Treasury bond offers scheduled for October 2026.
CBK said more information on the bonds, including their tenor, amounts, coupon rates and other issue terms, would be provided in the relevant prospectus ahead of each issue.
The switch auction comes as CBK continues to oversee activity in Kenya's domestic government securities market through regular Treasury bond and Treasury bill operations.
The latest results provide a picture of investor demand for government debt as well as the rates investors were willing to accept in the latest debt-management transaction.