Africa-Press – Kenya. Kenya’s attempt to restructure its debt through the government papers is facing growing resistance from investors, signaling caution in the country’s financial markets.
The country’s domestic debt market recorded a modest outcome following the Central Bank’s latest bond switch auction, as investors showed selective appetite amid evolving interest rate expectations.
The latest results show that investor interest is weakening. The government aimed to swap up to Sh20 billion worth of bonds, but only received bids totaling about Sh2.56 billion.
This means the response was lower than expected, with only about 12.8 per cent of the target achieved.
Central Bank sought to exchange older debt for newer securities, as part of the government’s broader liability management strategy aimed at smoothing maturities and reducing refinancing risks.
“Of the bids received, about Sh1.75 billion was accepted, with the majority coming from competitive bids,” said CBK director, financial markets Robert Aloo in the results
The subdued subscription highlights cautious investor sentiment, even as yields remain attractive in the fixed-income market.
The new bond carries a coupon rate of 12.65 per cent and matures in 2033, meaning investors would earn steady interest over several years.
Normally, such rates would attract strong demand. But this time, investors appear to be taking a more cautious approach.
The bid-to-cover ratio stood at 1.46, indicating that demand slightly exceeded the amount ultimately accepted, though overall participation remained below the targeted issuance level.
The weighted average rate of accepted bids came in at 11.97 percent, slightly below the market weighted average rate of 12.32 percent.
This suggests that while investors are still willing to participate, they are increasingly price-sensitive, likely reflecting expectations around future monetary policy direction and inflation trends.
The bond carries a coupon rate of 12.65 percent and is set to mature on May 9, 2033, with approximately 7.1 years remaining to maturity at the time of the switch.
The price per Sh100 at the average yield was recorded at 108.36, indicating that the bond is trading at a premium—consistent with the relatively high coupon in a moderating yield environment.
The switch auction involved exchanging holdings from the older FXD1/2016/010 bond into the newer FXD1/2018/015 issue.
Such operations are commonly used by debt managers to extend the maturity profile of government debt while offering investors an opportunity to rebalance portfolios.
Market analysts note that the muted demand could reflect tightening liquidity conditions in the banking sector, as well as competing investment opportunities.
Additionally, uncertainty around global interest rates and domestic fiscal pressures may have contributed to a more cautious bidding approach.
