The government will be turning to local investors to raise Ksh25 billion through the issuance of fixed Treasury Bonds.
According to the Central Bank of Kenya (CBK), the funds are aimed at fulfilling the fiscal requirements including budgetary support.
To achieve this, the government announced the reopening of the FXD1/2024/10 bond, aiming to raise the funds at a coupon rate of 16 per cent.
Coupon rate in this case is the annual interest rate paid to a bondholder and is normally expressed as a percentage of the bond's value.
It's important to note that the bond attracts an accrued interest of Ksh1.8462 per Ksh100 and withholding tax is calculated based on clean prices.
In this scenario, if the quoted yield stands at 16 per cent, the dirty price encompasses the clean price (Ksh99.9457) plus accrued interest (Ksh1.8462), resulting in a total of Ksh101.7919.
The minimum competitive bid amount stands at Ksh2 million per Central Securities Depository (CSD), while the maximum is capped at Ksh50 million per CSD account.
Prospective investors are urged to electronically submit their bids to the Central Bank via CBK Dhow CSD by 10:00 am on May 2, 2024.
Investors are advised to verify the status of their bids on the CBK DhowCSD investor portal/app under the bids tab on May 3, 2024. Additionally, they must obtain the payment key and amount payable for successful bids from the same portal.
CBK warns that defaulters may face suspension from future investments in government securities.
"The Central Bank will rediscount the bond as a last resort at three per cent above the prevailing market yield or coupon rate whichever is higher," read part of the notice.
"The bond qualifies for statutory liquidity ratio requirements for Commercial Banks and Non-Bank Financial Institutions as stipulated in the Banking Act CAP 486 of the Laws of Kenya."
CBK further noted that the bond would be listed on the Nairobi Securities Exchange FXD1/2024/10 as a benchmark Bond.
"The Central Bank reserves the right to accept bids in full or part thereof or reject them in total without giving any reason."
