NAIROBI, Kenya, Nov 30 – The Central Bank of Kenya (CBK) is issuing a Sh30 billion nine-year Amortised Infrastructure Bond to finance projects in the energy, water and transport sector.
The bond has a weighted tenure of seven years, with a coupon of 11 percent and the allocation of the proceeds will be Sh9.65 billion for Energy, Sh10 billion for Water and Sh10.35 billion for Transport.
The Bond will be tax free as is the case for all Infrastructure Bonds as provided for under the Income Tax Act with minimum amount at Sh100, 000 and a maximum Sh20 Million per investor.
Duly completed bond application forms must be submitted to any branch of the Central Bank in the specified tender box by 2PM on Tuesday December 8, 2015.
“This issuing of the long tenured bond is an indicator that the government views that the interest rate environment has stabilized and is now ready to issue long tenure bonds,” said Cytonn Investment Chief Executive Edwin Dande.
Dande says given that infrastructure bonds are tax exempt, they tend to be very attractive to both local and foreign investors.
“Having issued a five-year Bond and planning to issue a 9-year Infrastructure Bond in December, the Treasury views that the interest rate environment has stabilized and want to lock in funds for the long term,” Dande said.
The 5-year bond results were released and the subscription was at 165 percent as the government got Sh33.billion compared to Sh20 billion that they were looking for.
CBK accepted Sh30.7billion well above what they had offered to the market. The market average of the five- year bond was at 14.0percent and the average of the accepted bids at 13.9 percent.
“The high subscription on the bond is an indication that investors are seeking for high risk adjusted returns and the high acceptance rate shows that the government remains keen to raise money in the domestic market,” Dande said.
The Government is on track with its borrowing programme having borrowed Sh135.5 billion for the current fiscal year compared to a target of about Sh91.3 billion assuming a pro-rated borrowing throughout the financial year.
“We maintain our view that investors should be biased towards short-term fixed income instruments given the uncertainty in the interest rate environment,” he added.