Fixed Income Report - January 2020 - "Filling the gap"
• The Central Bank of Kenya (CBK) seeks to raise KES.50Bn in its first bond issue of the 2020 calendar year through two re-opened issues FXD1/2019/5 and FXD1/2019/10 with 4.13 and 9.13 Years to maturity respectively.
• Our report “Filling the gap” focuses on the two debt issues in the context of a bigger funding gap (KES.146.3Bn) as presented in the 1st supplementary budget in November 2019.
• Our report gives our investor bid predictions on what we expect to be a fully subscribed issue as follows:
o Weighted Average Rate (WAR) of bids 5 Year: 11.15% - 11.30% / 10 Year: 12.10% -12.25%
o Weighted average rate of accepted bids 5 Year: 11.10%-11.15% / 10 Year: 12.10%-12.15%
• Debt auction and trading activity was subdued in the month of December 2019 but we expect an increase in activity in January 2020.
• On national accounts, we continue to expect a shortfall in revenue and an increase in expenditure with the widening fiscal gap translating to increase Government borrowing.
• With regards to macro-economic analysis, we see both inflation and interest rates on short term domestic debt rising gradually but largely stable and this can be observed in our yield curve analysis.
• Commercial bank lending rates remain relatively unchanged even after the revision of the Central Bank Rate (CBR) by the Monetary Policy Committee (MPC). Download Report