The Central Bank of Kenya (CBK) is trying to raise Sh50 billion by selling three types of bonds. These include a two-year bond being sold again, and new 10-year and 20-year bonds. The first sale aims to get Sh20 billion and ends on July 4. The second sale seeks Sh30 billion and ends on July 17.
Bond Sale Details:
- Two-Year Bond: Investors will earn 17.1225% and pay Sh106.3186 for every Sh100. This interest rate is from the last time this bond got in place.
- 10-Year and 20-Year Bonds: The CBK wants investors to offer returns close to 16% for the 10-year bond and 13.75% for the 20-year bond. The 10-year bond, first issued in February, has a fixed return rate, unlike most bonds that have market-determined returns.
Key Points to focus:
- Interest Rates: The two-year bond offers a slightly higher return than its first issue rate of 16.9723%. The CBK is trying to lower interest rates on government bonds. But high interest rates and increased borrowing make this difficult.
- Fiscal Deficit and Borrowing: The domestic borrowing target for the year ending June 30 increases to Sh908.6 billion from Sh718.9 billion. Due to a larger fiscal deficit. Plans to reduce the deficit to Sh597 billion in the new financial year is in delay. This is because the 2024 Finance Bill, which included new tax measures and spending changes, was withdrawn. Read More
- 2024/25 Borrowing Targets: Treasury Cabinet Secretary Njuguna Ndung’u proposed borrowing Sh263.2 billion domestically and Sh333.8 billion externally for the 2024/25 financial year.
- Recent Bond Sales: The CBK recently raised Sh84.8 billion, surpassing its target of Sh80 billion,also by selling reopened bonds with tenors of two, three, five, and 10 years.
The CBK is issuing bonds with different maturities to help lower interest rates. This is on government securities in the short to medium term. This strategy aims to create a more stable financial environment despite ongoing challenges with high interest rates and the need for increased borrowing. READ ON