So received an email on the latest 9 year government of Kenya infrastructure bond issued by the CBK raising a whopping KShs 31.6 billion.

I had missed the last one and thought this new one would be my first foray into fixed income instruments - lakini sijui...
Any takers for this biggest bond issue ever???


ISSUE(S).......IFB2/2010/9
VALUE DATE.....30/08/2010
SALE PERIOD....06/08/2010 - 24/08/2010

TENOR....9yrs
AMOUNT...31.6 billion
PRICE Par/Discount/Premium

MINIMUM AMOUNT...100,000
COUPON RATE......6.00%

Download the Prospectus on the Infrastructure Bond
Download the Information Booklet

@muganda. Who sent you the email ? Sterling investment bank ? Or who.

..would have been nice if interest net of Tax was higher than inflation..


on a lighter note..yet to get over the fact that i flunked Corporate Finance BBM 327 because my research was "tenability of universities financing capital projects..(such as residential halls) through issuance of bonds/term/commercial paper in the capital markets".


now it doesn't seem such an untenable proposal..
No wonder lecturers are a broke lot.

@ProverB, interesting anecdote. In school, one is meant to learn theory not practice - so you deserved the fail

@Scooby @Wa_ithaka, not very attractive I agree, and so HUGE.

Now that Safaricom also want to come back to the market for their second tranche 4.5b (first tranche carried annual coupon of 12.25 percent), they may land in trouble for making the government won fail?

..
an exception to the norm! ..now stocksmaster ought to be a lecturer!

@kyt way low compared to which other investment vehicle,
A 30 year bond in the states is currently yielding a return of 3.72% when we compare this to our longest bond in the market which is the 25 year which is returning a yield of around 9.85% the ROI is good.The problem is if there will be a complete uptake of the bond considering thez bin waning interest in the fixed income side of the capital market.

Good point; and if I may digress, one wonders how effective fund managers (experts of investments) are if all they do is make such a conservative play when the interest rates are at an all time low.

Which funds do these guys manage? How would one effectively benchmark if a fundmanager is doing stuff when it comes to fixed income instruments? Index...Av coupon rates...TBill rate...

Surely NOW, if this risk free infrastructure bond coupon rate is deemed tooo low by Wazuans, yet it's only at 6%...
Why would anyone in their right mind pay a fund manager, and mark his performance par if he only got 1.999%?

There must be another measure! I saw presentation by NSE where they introduce an animal called Average weighted coupon rate payable on bonds at 10.38% for 30-Jun

Check the presentation page 7 http://www.nse.co.ke/new...BY%20PETER%20MWANGI.pdf

I have never participated on any bond but I listened some technocrats on NTV yesterday discuss this bond and I got more confused.and this is why.

The previous bond which had a coupon of 12% was trading at a loss since inflation at that time was 14%.

This bond which has a coupon of 6% is trading at a profit because the inflation is below 4%.

Now if you look at those scenarios the guy who bought last years bond is enjoying more returns currently as opposed to those who will buy the one with the 6% coupon.

Another thing that confused me even more why use a borrowing instrument as a tool to bring down inflation,without first arresting those factors that cause inflation to rise.

@selah. To see the factors that influence inflation in Kenya you'll have to look at certain things such as money supply growth, and balance of payments. The governor said that there's no demand pull inflation in the system so focus more on BOP IMHO.

Judging by the results of the 182 t-bill this bond now requires a better premium. The vibrancy of trade especially on the long end has declined, with increasing interest rate risk, so the bond seems a viable option for most fund managers (for its other qualities). As long CBK avails enough liquidity in the system then they can dictate the level of subscription. I think inflation is a none issue so i focus on the spread between cost of funding and bond rates to see the profit.