15 year Treasury bond auction registers 234 pc performance rate.

The re-opened 15-year old bond that was put to sale this month has been oversubscribed due to dropping interest rates and excess liquidity in the market.

The Central Bank of Kenya on Wednesday said the Treasury bond, FXD 1/2013/15, has attracted bids worth Sh23.4 billion against the targeted Sh10 billion, a 234 per cent performance rate.

CBK accepted Sh14.4 billion, or 61.6 per cent, of the total bids received. The bond is paying interest at an annual 11.25 per cent coupon rate every six months.

“There is liquidity within the market which means there is enough cash to invest. Also there is anticipation that rates could be coming down, which equals to low returns, and the bond offers a better investment tool,” says Edward Munyi, a dealer with Suntra Investment Bank.

Investors shunned

Last year investors shunned the treasury bond when it was reintroduced in July, attracting bids worth Sh9.1 billion against the targeted Sh15 billion.

Still, the weighted average rate of accepted bids declined by 139 basis points to 12.375 per cent compared to the July 2013 auction.

The market weighted average rate stood at 12.515 per cent, 146 basis points lower than the 13.975 per cent posted at the last auction.

“Thus far in 2014, riding on improved market liquidity, investor appetite for long-term gilt instruments has remained high, albeit at lower yields,” read the market research by Standard Investment Bank.