Fixed Income Report - May 2019 - “CBK’s quest for debt continues”
• Our May fixed income report titled “CBK’s quest for debt continues” provides a detailed investment analysis of the FXD2/2019/5 (5Years) and FXD2/2019/15 (15 Years) primary Treasury Bonds (T-Bonds).
• The Central Bank of Kenya (CBK) wishes to raise KES.50Bn from the two issues.
• We forecast the weighted average rate (WAR) of accepted bids to be 11.15% and 12.75% for the 5 and 15 year papers respectively.
• Our analysis of Treasury Bill (T-Bill) and Treasury Bond (T-Bond) auction results show a high preference for short dated securities.
• We further analyse the latest data available on Government receipts and expenditures in the 2018/19 fiscal year where we observe a high absorption rate of receipts (98.8%) suggesting high financing demand.
• This we expect to have on the CBK’s borrowing strategy in subsequent months.
• The month of April 2019 had the second biggest domestic debt maturity amount this fiscal year amounting to KES.102.8Bn with another KES.33.2Bn to be redeemed in May.
• On the macro economic front, we focus on rising inflationary pressure in April and our expectations for May where we expect inflation to ease to between 5.0%-6.0% on improved weather conditions.
• Market liquidity is key in determining domestic debt demand and we expect it to remain supportive for the CBK in its quest to raise capital in May. Download Report