Kenya's infrastructure bond auction on Wednesday attracted bids worth Ksh37.62 billion ($430.4 million), almost double the amount that the banking regulator was seeking.

The Central Bank of Kenya (CBK) was selling debt worth Ksh20 billion ($228 million) through the infrastructure bond, the first to be floated in two years.

Its prospectus showed that the government is intending to spend Ksh10.1136 billion ($115.5 million) to fund water, sewerage and irrigation projects, Ksh14.2784 billion ($163.09 million) to develop transport infrastructure and Ksh11.6334 billion ($132.8 million) for energy projects this year. The proceeds from the bond will partially finance these projects.

CBK last sold an infrastructure bond in October 2011 when it issued Ksh14.13 billion ($140.71 million) in debt to fund various projects country wide.

The current 12-year government infrastructure bond is paying interest at an annual rate of 11 per cent every six months but its coupon payments and discount will be tax free.

The average yield of the accepted bids is 12.363 and investors will be required to pay Ksh93,290 ($1,067) for every Ksh100,000 ($1,144).

Its coupon rate is however lower than the 12 per cent annual rate being paid by the last infrastructure bond issued in 2011 but higher than the 6 per cent annual rate that is being paid by the one issued in 2010. 

The auction was done only days after terrorists attacked the Westgate Mall in Westland’s, plunging the country into a crisis that is expected to have economic ramifications going forward.

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Bids for government bond are expected to be in at least a day before the auction, in this case Tuesday when the government officially announced that the Westgate Mall siege was over and investor interest in the bond seem not to have been affected by the weekend attack.

The 182-day and 364-day Treasury bill issues, which were seeking a combined Ksh6 billion ($68.6 million) were however undersubscribed attracting bids worth Ksh3.22 billion ($36.9 million) while yields continued their downward trend to 9.67 per cent and 10.308 per cent respectively.

The infrastructure bond was being sold at the same time as Shelter Afrique’s Ksh3.5 billion ($39.9 million) offer which closed last Friday and whose results are expected this week.

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Shelter Afrique’s five-year bond, which is expected to start trading at the Nairobi Securities Exchange next Monday, has no discount.

It is however paying interest at an annual rate of 12.75 per cent every six months, similar to the three year bonds worth 0.5 billion ($5.8 million) issued in December last year. 

The two offers came a few weeks after Jamii Bora Bank, one of the smallest in the country announced that its 5-year privately placed Ksh1 billion ($11.46 million) bond, that is paying interest at an annual rate of 13.3 per cent every six months had been oversubscribed by two per cent.