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Kenya 25-year bond oversubscribed.

The Kenyan government has successfully issued a 25-year bond, which sets a marker for the capital market and points the way for other African markets to follow. It is a major boost for investor confidence and also helps the government access cheaper and longer-dated debt. The 25-year bond, priced at an indicative coupon of 11.25% and redeemable in 2035, raised KSh7.5bn ($91.7m) at low interest rates which averaged 10.46%. Duncan Kinuthia, head of fixed income at Bank of Africa, commented: "The return is very low for a bond with such a tenor, which explains the excess liquidity in the market looking for investment opportunities but with not many options." The bond was three times oversubscribed, as the Central Bank of Kenya received 586 bids. Jackson Kitili, monetary operations and debt management director at the central bank, said: "The

The report says that 90% of bonds traded are transacted by banks and institutions such as fund managers. Highnet-worth individuals are also active. James Mutuku, head of asset liability management at Standard Chartered, reportedly attributes the increased liquidity to the ATS and the fact that banks are establishing dedicated bond trading desks. The ATS settles the day after trading, compared to the week that settlement previously took.

number of bids accepted was 248, worth KSh 7.5bn ($8.8m) and the weighted average rate of successful bids was 10.458%."

The bond was listed on the Nairobi Stock Exchange for secondary trading and the price climbed quickly, dropping the yield to 9.9%.

Fred Mweni, managing director of Tsavo Securities and chairman of Bond Traders Association of Kenya, had earlier forecast: "I see it settling at the rate of 9.5%. It is also an opportunity for the government to move in and retire the expensive debt that it is holding."

The Kenya Central Bank says annual inflation was 3.88% in May 2010 and the last 6-month Treasury Bill auction went at a yield of 2.45%.

Pressure has therefore eased for servicing government debt, which is projected to hit KSh1.1 trillion ($1.3bn),

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Publication:African Banker
Geographic Code:6KENY
Date:Oct 12, 2010
Words:360
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