By: OTIATO GUGUYU
The government is offering a Sh20 billion five-year bond which starts maturing in early 2016 to balance the short-term credit.
The government has borrowed Sh105 billion locally for the current fiscal year compared to a target of about Sh91.3 billion, cooling its appetite and sending rates on a free fall.
Returns for the 91-day T-Bill fell to 9.65 per cent from 13.76 per cent recorded last week after peaking at 22.5 per cent on October 22.
Analysts have however warned that the rates could swing back when the short term loans mature putting pressure on Treasury to finance the debts.
Cyton Investments, in a recent weekly report, said that total government debt maturities will stand at Sh58.0 billion in the month of December alone.
The dollar denominated Eurobond interest payment of Sh9 billion, will bring the total debt due in December to Sh67 billion.
In January 2016, the figure will stand much higher at Sh86 billion.
“They have been picking up debt at very high interest rates and will have to pay the short term debt soon.
“It will be advisable for the government to balance their debt portfolio,” Eric Munyoki, an analyst with Sterling Capital said.
CFC Economist Jibran Qurdeshi said the market expected interest rates to pick up in January adding that the current fall is temporary.
The mid-term instrument comes after the government offered two one-year bonds in September and October to fund the current budget deficit.
Mr Munyoki said the five-year bond will attract market players who have seen subscription for T-Bills fall on lower rates.
“I think the bond may attract a higher rate of between 11 and 12.5 per cent which will see increased interests by fund managers and banks,” he told the Nation by telephone.
Kenya expects to finance the budget shortfall of Sh340 billion from external financing and Sh229 billion from the domestic market.
SOURCE: DAILY NATION