It is the first time the State has issued a 15-year infrastructure bond, which is targeted at funding specific development projects. Central Bank of Kenya (CBK) Thursday reported it received offers 13 per cent above the Sh30 billion it projected to borrow on behalf of the State. Capital gainsOversubscription to such long-term debt instruments is an indication of investors’ sentiment that interest rates are not likely to rise dramatically in the near future. Currently, irrespective of a borrower’s risk profile, all bank loans are priced at a maximum of 14 per cent because the CBR is pegged at 10 per cent. Riskier borrowers would in the absence of rate caps have had their loans priced at a higher premium, informing the deliberate shift to investing in Government securities, which carry a zero risk of default.

Source: Standard Digital October 20, 2016 16:30 UTC