wazua Sat, Apr 11, 2026
Welcome Guest Search | Active Topics | Log In

2 Pages<12
CBK 5 EAR BOND NOW SELLING
Options
Previous Topic · Next Topic
Scubidu
#11 Posted : Saturday, November 20, 2010 12:40:36 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
Scooby wrote:
@ MatataMingi, All the best with your competitive bid! Let us know how it went...

@ Maka, with the current auction method (am not sure if its the dutch method or not), the average rate is the "market" determined coupon rate for the bond. It will also be the yield for that bond i.e. issued at par.

So, should you bid at a lower rate than the average rate, you would have bought the bond at a premium.




@scooby. I don't think it's a dutch auction but maybe some variation of one. Here it seems there's a disincentive to bid low as you mentioned. Is there a cut-off rate feature within a dutch auction?

i had briefly mentioned it another post. see below.

http://www.wazua.co.ke/f....aspx?g=posts&t=6659
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Back to top
  |
maka
#12 Posted : Tuesday, November 23, 2010 5:07:34 PM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
by tomorrow evening will have the results or part of it...
possunt quia posse videntur
Back to top
  |
maka
#13 Posted : Thursday, November 25, 2010 12:17:49 PM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
Bids received amounted to over 18 Billion accepted was close to 11.97 million,coupon at 6.07 weighted average at 7.03...or thereabout,still shows there is a lot of liquidity in the economy.
possunt quia posse videntur
Back to top
  |
Scubidu
#14 Posted : Thursday, November 25, 2010 4:38:45 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
@scooby. @maka. Did you notice something different about this auction...specifically the coupon rate is equal to the weighted average on success bids. These guys have changed the rules ...
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Back to top
  |
MatataMingi
#15 Posted : Friday, November 26, 2010 11:29:56 AM
Rank: Member

Joined: 11/17/2009
Posts: 399
Location: Where everyone knows you
@ Maka

Weighted average rate of accepted bids was 6.671, which is also the coupon rate!!!! Cut of rate was 7.09.

I put in 3 bids at 7, 7.25 & 7.5. Therefore the bid at 7 was accepted.
Back to top
  |
MatataMingi
#16 Posted : Friday, November 26, 2010 11:48:15 AM
Rank: Member

Joined: 11/17/2009
Posts: 399
Location: Where everyone knows you
@Scubidu

Good point. I think this is the first time that the coupon rate and the weighted average rate is the same.

CBK started changing rules from early this year. Before that they always published a coupon rate before the auction. This gave you a better idea of what rate to bid at.
Now it is what they call a "market determined coupon rate"
Therefore now your bid is really a shot in the dark. I bid at a rate that is acceptable to me. Wheather it is successful is another thing.
In this auction the lowest bid was 4.750 and the highest 10.740

Regards
Back to top
  |
maka
#17 Posted : Friday, November 26, 2010 1:10:16 PM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
@ scooby the market weighted average was 7.078% which is the one that is close to the cut off rate but the market weighted average for the accepted bids is the one which is 6.671% and same as the coupon rate...
possunt quia posse videntur
Back to top
  |
Scubidu
#18 Posted : Friday, November 26, 2010 4:01:15 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
@matataMingi. @Maka. Market determined or not this is the first time the coupon is equal to market rate on successful bids, which to the best of my knowledge means that they've changed their methodology for deriving the coupon rate.

When was the last time anyone saw a market determined coupon issued at par?
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Back to top
  | | Edit by user: Friday, November 26, 2010 5:34 PM | Reason: Not specified
Scooby
#19 Posted : Saturday, November 27, 2010 12:06:42 AM
Rank: Member

Joined: 9/2/2006
Posts: 121
Hi all,

Let me know if my understanding of the auction process makes sense.

The auction is done in two phases. The first phase is used to determine the first set of bids that they will accept and/or reject. That would explain the cut off rate of 7.090% and the average rate of the bids that were successful in the first round (7.078%).

Thereafter, they will perform a real dutch auction, with the lowest bids selected first (one for 4.75%)...then will selected bids that would get CBK to the Kshs. 12 billion amount they are seeking.

The weighted average rate for all the successful bids (6.691%) would then be the market determined rate.

This is more confusing than the earlier versions of the auction process!!

Regards
Back to top
  | | Edit by user: Saturday, November 27, 2010 12:08 AM | Reason: Not specified
Scubidu
#20 Posted : Saturday, November 27, 2010 4:37:27 PM
Rank: Veteran

Joined: 9/4/2009
Posts: 700
Location: Nairobi
@scooby. @all. Ideally if they use the real dutch the guys who bid at 4.75% should ideally be awarded a rate of 6.671% but this isn't the case to best of my knowledge.

Then again if they are using the real dutch then what's the purpose of the cut-off rate?

The coupon has always been close to the market average rate, but this time they've found a formula to counter aggressive bidding.

It seems to be some hybrid system and they've set the precedent that all future bonds in primaries will be issued at par (if the market determined coupon=average rate on successful bids).
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Back to top
  |
2 Pages<12
Forum Jump  
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.

Wazua Investor Theme
Powered by YAF | YAF © 2003-2009, Yet Another Forum.NET
Copyright © 2026 Wazua.co.ke. All Rights Reserved.