Analysts forecast oversubscription for 25 years bond

THE debt investors are closely watching today’s 25 years Treasury bond auction, while analysts smell oversubscription.

The oversubscription sprung from the fact that investors may buy the 25 years bond at a good price at the auction compared to the secondary market.

On the secondary market, the 25-year bond last week recorded an average yield of 12.89per cent with an average price of 106/51 while the 20-year Treasury bonds had an average yield of 12.73per cent and price of 107/60.

“We forecast an oversubscription in the (today’s) 25-year Treasury bond auction results,” Mr Ahmed Nganya, the Manager, Advisory and Capital Markets at Vertex International Securities said on Tuesday.

The 25-year bond is a darling for some local institutional and retail investors, as it pays a 12.56 per cent coupon annually.

At the last auction of the 25 years bond last year, the yields stood around 12.75 per cent while the average price was 98/53 and was oversubscribed by over 100 per cent.

Overall, on the secondary market, the turnover increased slightly over two times from 60.321bn/- registered in the previous week to 134.58bn/- last week.

Zan Securities said the secondary bond market recorded a total of 54 deals from both Treasury bonds and the corporate segment, recording a total turnover of 156.07bn/-.

“Overall tenures traded were predominately on the long end of the yield curve, with the off-the-run 15-year Treasury bond accounting for 38.83 per cent of the traded volumes,” Zan Securities said in its weekly market wrap-up.

Additionally, activities in the corporate bond segment continue to be on the rise, two trades were executed within the trading week, one NMB Bank corporate bond was traded with an aggregate face value of 7.0m/- and NBC Bank corporate bond registered one trade carrying an aggregate face value of 30m/-.

The 15-year Treasury bonds recorded an average yield of 11.90 per cent and an average price of 113/92 and 10-year Treasury bonds with an average yield of 9.61per cent and price of 108/25.

For the corporate bond segment, The NMB 3-year bond recorded an average yield of 37.58per cent and a price of 100/- and the NBC 5-year bond recorded an average yield of 10.50per cent and a price of 100/-.

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