High interest rates stall Treasury Sh5bn bond issue through M-Pesa

The government has delayed the launch of the affordable M-Akiba bond due to high interest rates in the market.

The Sh5 billion bond, which will exclusively trade on mobile phone platforms targeting ordinary Kenyans, was set to be launched this month.

Treasury secretary Henry Rotich reckons that the government is assessing the market environment before floating the debut Sh5 billion bond.

“We are waiting to see how rates in the market behave before we set an appropriate date,” said Mr Rotich.

Yields on 91-day, 182-day and 364-day bills have all climbed above 22 per cent. While this has propped the shilling against the dollar, it has seen commercial banks raise deposit rates and lending rates to a high of 27 per cent.

Individuals can bid with as little as S,000, down from the current minimum of Sh50,000 and a maximum of Sh140,000 for the income tax free bond.

The marketing team made up of officials from the stockbrokers lobby, Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC) said the sale was on track, and it was awaiting the launch date from the government.

As we speak, the product is ready systems and softwares and all the stakeholders are ready,” the committee said in a statement Tuesday.

“We are awaiting an ideal date from the government on when the launch will take place. This date shall officially be communicated soon.”

The government expects the interest rates to go down as it cools off its borrowing from the domestic market.

The Treasury is hoping to dampen its debt appetite by securing a Sh80 billion syndicated loan from Standard Chartered, Stanbic and Citi Bank in two weeks to ease the cash crunch that has affected government business.

Central Bank governor Patrick Njoroge said last week the country is expected to witness a gradual fall in interest rates, especially as the interbank rate fell from a high of 25.8 per cent at the end of September to 13.9 per cent last week.

“The T-bill shot up after a three month delay to react to increase in the benchmark rate by 300 basis points. We want to engineer a soft landing so that everything does not come down suddenly,” he said at a press conference in Nairobi last week.

However, a lack of information to buyers may hurt the subscription for the first sale of the cheap bond.

Kenyans have been eagerly awaiting an opportunity to participate in government’s risk-free paper which has been out of reach requiring a minimum investment of Sh50,000.

The five-year bond would not attract any income tax and individuals sitting anywhere with mobile phones can bid up to Sh140,000 daily.