The Kenya Mortgage Refinance Company (KMRC)’s debut bond issue has been oversubscribed nearly six times, continuing the recent trend of high demand for corporate bonds.

The Sh1.4 billion offer attracted bids worth Sh8.1 billion, the Capital Markets Authority (CMA) said on Tuesday, affirming expectations by analysts that the paper would attract good demand due to the interest rate premium it was offering comparable to government bonds of similar duration.

The seven-year bond’s principal will be paid down annually, meaning the average time the debt will be outstanding is 4.5 years. It is the first tranche of a Sh10.5 billion medium-term note programme.

The company is paying a fixed interest rate of 12.5 percent on the paper, which is a percentage point above what the government is paying on its bonds that have about five years to maturity.

KMRC will however only take up Sh1.4 billion out of the Sh8.1 billion put on the table by investors since the company did not include an option to accept more funds in what is technically known as a greenshoe option.

“This is a major milestone which positions the capital markets as a source of funding to support productive economic activities such as the delivery of affordable housing, which is one of the pillars of the Big Four Agenda. It affirms the growing issuer and investor confidence in the bond market,” said CMA chief executive Wyckliffe Shamiah.