The typical interval to maturity for Treasury bonds has doubled to eight.6 years within the final three years, following a transfer by the Treasury and the Central Financial institution of Kenya (CBK) to situation longer-dated bonds to cut back the refinancing danger for the federal government’s home debt.
The maturity profile for bonds had fallen to simply 4.1 years in June 2018, elevating issues that the fast maturities would pose an issue for the federal government when elevating money both to roll over or retire the debt.
The Treasury, subsequently, shifted most of its bond issuances to longer tenors, whereas on the similar time decreasing the share of debt held in type of the short-term Treasury payments in a bid to additional cut back the quick stress on the exchequer to refinance home debt.
“In June 2019, it was 7.7 years, and this has been elevated to eight.6 years in June 2021. The ratio of T-bills to bonds on the time was 34 % T-bills and 66 % bonds. This has been improved to 21 % in T-bills and 79 bonds,” CBK governor Patrick Njoroge stated on Thursday.
“That enchancment is one thing that’s actually useful to authorities, and is an effective indicator of the collaboration that has taken place between the CBK and the Treasury to realize this final result,” he added.
Prior to now yr, the typical time to maturity for all bond tranches issued by the federal government stands at 13 years.
The largest beneficiaries within the push in direction of longer-dated bonds have been pension funds, which have raised their share of presidency home debt to 31.1 % as of mid this month from 27 % in June 2018.
The pension funds choose longer-dated bonds because of the lengthy funding horizon of retirement contributions and are subsequently extra energetic out there when the Treasury floats longer papers.
Banks, alternatively, choose shorter-dated bonds, that are extra aligned to their shortly shifting liquidity wants.
With the Treasury largely shunning short-dated papers in current months, lenders have seen their share of the federal government’s home debt fall to 50.8 % from 55 % in June 2018.