NAIROBI, Feb. 28 (Xinhua) -- Kenya's Treasury on Tuesday returned to the debt market in a tap sale of this month's 12-year bond seeking to raise an additional 233 million U.S. dollars a week after declining to pay investors a higher price on the paper.
A tap sale allows the government to sell Treasury bonds from past issues, with the securities being issued at their initial face value and coupon rate, but sold at the current market value.
In the initial sale of the 291 million dollars bond, the Treasury absorbed a paltry 58 million dollars out of bids that amounted to 340 million dollars.
This was an indication of government's reluctance to borrow expensively especially from commercial banks, which have switched to the securities following capping of interest rates.
Money raised from the project was to be used for funding projects in roads, water and energy sectors.
The tap sale will be open from Feb. 28 to March 2, and among other things, will help mop up money left in the market during the initial sale.
"Bids shall be priced at the weighted average rate of the accepted bids (13.5 percent) for the bond auction value and adjusted for accrued interest," said the Central Bank of Kenya Tuesday in a notice, adding the coupon rate was 12.5 percent.
Analysts noted that the government is under pressure to borrow from the domestic market to meet the high level of debt maturities, which may result in an upward pressure on interest rates.
However, it is unwilling to borrow expensively as it is ahead of its target in its domestic borrowing program, which means that it is unlikely to accept bids deemed higher than the prevailing yield-curve level.
"The government is ahead of its domestic borrowing for the current fiscal year having borrowed 1.93 billion dollars against a target of 1.5 billion dollars," said Cytonn, a Nairobi-based investment firm.
