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CBK 5 EAR BOND NOW SELLING
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MatataMingi
#1 Posted : Wednesday, November 17, 2010 4:46:49 PM
Rank: Member

Joined: 11/17/2009
Posts: 399
Location: Where everyone knows you
Hi Guys,

New 5 year bond issue FXD 2/2010/5 is now on sale.

Interest rates for Bills & Bonds are going up.

10 Year Bonds

The 10 year bond sold on 26 April had a coupon rate of 8.79 and yield of 8.633.

The 10 year bond sold recently on 1 November had a coupon rate of 9.307 and a yield of 8.646.

5 Year Bond

The last 5 year bond sold on 24 May had a coupon rate of 6.951 and a yield of 6.829

So, good guys, what do you think the result of this new bond will be ?

I think the coupon/yield will be around 7.5/8 %

Any thoughts ?

Thanks
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Scooby
#2 Posted : Wednesday, November 17, 2010 10:02:31 PM
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Joined: 9/2/2006
Posts: 121
MatataMingi,

Am not sure if the coupon and/or yield might rise up to that level.

I've noticed that there is usually a greater demand for five year treasury bonds than for ten year bonds.

Also, there is too much excess liquidity in the market.

Regards
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maka
#3 Posted : Thursday, November 18, 2010 10:53:34 AM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
Il go with scooby on this thez no way it can go that high though some optimistic bank dealers have hinted that they can even enter at levels of 7.00% my take between 6 and 6.25...
possunt quia posse videntur
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MatataMingi
#4 Posted : Thursday, November 18, 2010 12:12:24 PM
Rank: Member

Joined: 11/17/2009
Posts: 399
Location: Where everyone knows you
Scooby
I agree with you regarding the demand between the 5 & 10 year bonds.
However, GBK interest rates are creeping up, albeit very slowly.
Therefore, I think if the 5 year bond in May fetched a coupon rate of 6.951, this issue will fetch over 7 %

Maka,
Thanks for your input. I think I will apply at 7.25 and see what happens.

Regards
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maka
#5 Posted : Thursday, November 18, 2010 3:53:10 PM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
Lets wait for the results after the primary but my take is 7% will be too aggressive there is a lot of liqudity and a 5 year people is usually favourable for mist guys coz of its tenor...
possunt quia posse videntur
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Scooby
#6 Posted : Thursday, November 18, 2010 7:07:18 PM
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Joined: 9/2/2006
Posts: 121
MatataMingi,

Are you applying for the bond in your own capacity or for the company you are working for?

If its the former, I would recommend that you make a non-competitive bid should you want to have a greater success in getting it.

Regards
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MatataMingi
#7 Posted : Friday, November 19, 2010 9:22:52 AM
Rank: Member

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

You seem to be spot on your estimate of 6 to 6.5

A Reuters poll of 10 fixed income traders agree with you. However they also underestimated on the last 10 year bond with a median of 8.23. The result came in at 8.646 with a coupon of 9.307.
See the poll results below

5 YEAR
Commercial Bank of Africa 5.75
Barclays Bank 5.75
Tsavo Securities 5.75
Equatorial Commercial Bank 5.85
Citi Group 5.95
African Alliance Kenya 6.25
Sterling Investment Bank 6.25
CFC Stanbic Bank 6.25
Kenya Commercial Bank 6.25
Co-op Bank 6.60

Median 6.10 Mean 6.065

I think it will come in at around 6.4
I dont want to tie my money for 5 years at this price. I will look for something else.

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MatataMingi
#8 Posted : Friday, November 19, 2010 9:54:58 AM
Rank: Member

Joined: 11/17/2009
Posts: 399
Location: Where everyone knows you
Scooby,

I am doing this for myself.
Non competitive bids are always accepted by CBK, as these only account for 5 to 15 % of accepted bids. CBK always takes all of these. Then they start with the lowest competitive bid and go up untill they reach there target. It also depends on how hungry they are.
The rate for the non competitive bids is the average of all the competitive bids accepted.

I think for this issue the average will be around 6.4

Regards
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maka
#9 Posted : Friday, November 19, 2010 12:28:45 PM
Rank: Elder

Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
If am not wrong the non competitive bid is given at coupon...
possunt quia posse videntur
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Scooby
#10 Posted : Friday, November 19, 2010 11:38:12 PM
Rank: Member

Joined: 9/2/2006
Posts: 121
@ 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.



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