Banks show strong appetite for investments

KUWAIT CITY, Oct 16: The Central Bank of Kuwait (CBK) witnessed a 6.7% increase in the pace of its bond and corresponding tawarruq issuances during the first nine months of 2023 compared to the same period in the previous year. The total value of these issuances reached 450 million dinars, up from the previous year’s 6.72 billion dinars. During this period, the Central Bank issued 30 bond offerings. In comparison, the first nine months of 2022 saw 26 issuances with a total value of 6.2 billion dinars. Banks covered these issuances by 11.7%, equivalent to 79 billion dinars.

In October 2023, the Central Bank issued a bond with a value of 240 million dinars, featuring a three-month maturity and an interest rate of 4.375%. This marked the second issuance during October, following the issuance of 240 million dinars in bonds with a six-month maturity and a 4.5% interest rate. The total value of these two issuances was 480 billion dinars, which was covered at a rate of 12 times.

Balance
According to the Central Bank’s data from August, the balance of its bond and tawarruq issuances with local banks increased by 6% annually, reaching 3.405 billion dinars by the end of August 2023. This was a significant rise from the 3.213 billion dinars recorded at the end of August 2022. It also increased by 1.2% or approximately 42 million dinars from the start of 2023 when it was 3.36 billion dinars at the end of December 2022. In 2023, the Central Bank issued two bonds in January, with a total value of 440 million dinars. These were covered by more than 5.17 billion dinars, approximately 11.7 times.

One of these was a three-month bond with a value of 200 million dinars, featuring an interest rate of 4.125%, while the other was a six-month bond worth 240 million dinars at an interest rate of 4.25%. The Central Bank also issued two bonds in February with three-month maturities and an interest rate of 4.25%. These had a total value of 400 million dinars and were covered by over 5.43 billion dinars, approximately 13.5 times. In March, the Central Bank launched four bond issuances with a total value of 1.07 billion dinars. They were covered by 7.935 billion dinars, approximately 9.5 times. The first issuance was worth 240 million dinars with a three-month maturity and a 4.25% interest rate, and it was covered by 3.042 billion dinars.

The second had the same terms and was covered by 2.57 billion dinars. The third issuance was valued at 350 million dinars, with a six-month maturity and an interest rate of 4.375%, and it was covered by 2.57 billion dinars. The fourth issuance had a value of 240 million dinars, a six-month term, and an interest rate of 4.375%. In April, the Central Bank launched two bond issuances with a total value of 480 million dinars. These were covered by 5.409 billion dinars, at a rate of 11.2%. The first issuance was a six-month bond valued at 240 million dinars with an interest rate of 4.375%, covered by 2.847 billion dinars. The second bond was also a six-month offering, valued at 240 million dinars, with an interest rate of 4.375%, and it was covered by 2.56 billion dinars. In May, the Central Bank issued seven bonds with a total value of 1.34 billion dinars, which were covered by 17.995 billion dinars at a rate of 13.4 times. These bonds included three-month bonds valued at 200 million dinars and 160 million dinars, six-month bonds worth 160 million dinars and 240 million dinars, and a one-year bond of 100 million dinars. In June, the Central Bank issued three bonds, totaling 710 million dinars, which were covered by 7.55 billion dinars at a rate of 10.63 times.
These issuances included a six-month bond worth 230 million dinars and two three-month bonds, each valued at 240 million dinars. July saw a single bond issuance of 240 million dinars for a three-month maturity, covered by 2.818 billion dinars. In August, the Central Bank launched three bond offerings with a total value of 600 million dinars, which were covered by 7.76 billion dinars at a rate of 12.9 times. September had four bond issuances with a total value of 1.56 billion dinars, covered by 17.98 billion dinars at a rate of 11.53 times. The growing demand for bonds reflects banks’ interest in investing in these instruments due to rising returns. After witnessing significant declines, the return on investment in bonds started to increase in 2022 and continued to rise throughout the third quarter of 2023.

By Ahmad Fathi
Al-Seyassah/Arab Times Staff