Kenya’s domestic debt market has opened FY2025/26 on a bullish note, with investors shifting decisively towards long-term bonds amid falling short-term returns and a more accommodative monetary stance.
- •In the reopened bond auction dated July 14, 2025, the Central Bank of Kenya (CBK) raised KSh 66.65 billion, surpassing its KSh 50 billion target.
- •The two instruments on offer—FXD1/2018/020 (20-year) and FXD1/2018/025 (25-year)—drew total bids of KSh 76.91 billion, with the longer bond achieving a stronger 87.66% performance rate versus 66.15% for the 20-year.
- •Accepted average yields stood at 13.90% and 14.35%, making the offer especially attractive to pension funds and insurers seeking to lock in stable returns.
This auction follows the end-of-year reopening on June 23, where CBK tapped the market for FXD1/2020/015 (15-year) and SDB1/2011/030 (30-year). That sale netted KSh 71.64 billion on KSh 101.36 billion in bids—a 202.72% performance rate—confirming that institutional appetite for duration was already well in motion.
In contrast, the short end of the curve continues to lose traction. Weekly T-bill auctions leading up to the bond reopenings saw declining enthusiasm. On July 7, CBK accepted KSh 21.77 billion, but only the 182-day paper was oversubscribed. Just a week earlier on June 30, total T-bill subscriptions fell short, with only the 364-day bill attracting excess demand. Yields have remained near cycle lows: 8.14% (91-day), 8.46% (182-day), and 9.72% (364-day), following the CBK’s recent rate cut.
The shift to bonds reflects a recalibration of investor strategy: with short-term rates declining and liquidity abundant, institutions are opting to extend duration and lock in double-digit yields. This trend bodes well for the National Treasury’s KSh 635 billion net domestic borrowing target for FY2025/26.
