The August infrastructure bond sale drew unprecedented investor interest, with bids exceeding the offer by KSh 233.4 billion.
- •The Central Bank of Kenya (CBK) received KSh 323.43 billion for reopened IFB1/2018/015 (15-year) and IFB1/2022/019 (19-year) papers against a KSh 90 billion target.
- •While the February 2024 record of KSh 218.66 billion excess demand was for a single paper, this new mark reflects combined demand across two tenors, making it the highest total oversubscription by amount in CBK’s history.
- •Infrastructure bonds are exempt from withholding tax, making them attractive to tax-sensitive institutional investors such as banks and pension funds.
The near-13% yields for both tenors add to their appeal, especially amid expectations of potential rate cuts later in the year.
The CBK accepted slightly above the target, allocating KSh 50.66 billion to the shorter tenor and KSh 44.36 billion to the longer tenor. The bid-to-cover ratio was 4.26 for the 15-year bond and 2.42 for the 19-year, indicating stronger appetite for shorter-duration paper at high yields.
Competitive bids totaled KSh 270.42 billion, while non-competitive bids reached KSh 53.01 billion, showing the growing retail participation in government securities.
| Metric | IFB1/2018/015 (7.50 YTM) | IFB1/2022/019 (15.60 YTM) | Total |
|---|---|---|---|
| Amount Offered (KSh Bn) | — | — | 90.00 |
| Bids Received (KSh Bn) | 215.94 | 107.49 | 323.43 |
| Amount Accepted (KSh Bn) | 50.66 | 44.36 | 95.01 |
| Weighted Avg Rate (%) | 12.9807 | 13.9985 | — |
| Cut-off Rate (%) | 12.9934 | 13.9991 | — |
| Coupon Rate (%) | 12.5000 | 12.9650 | — |
Secondary Market Impact and Tap Sale Possibility
With KSh 228.4 billion in bids rejected, unmet demand is expected to spill into the secondary market.
- •The Nairobi Securities Exchange bond market has already traded a record KSh 1.55 trillion in the first seven months of 2025, surpassing the 2024 full-year record of KSh 1.54 trillion and on track to break the KSh 2.5 trillion mark.
- •Demand for the reopened IFB papers, along with possible spillover into other bonds, could further lift secondary market activity.
- •Similar oversubscriptions in February 2024 and February 2025 drove post-auction price gains and yield compression as investors competed for limited supply.
The CBK could opt for a tap sale to capture part of this excess demand. In August 2024, a tap sale two weeks after a heavily oversubscribed IFB raised an additional KSh 38 billion.
Tap sales offer rejected bidders allocations at auction-level yields instead of paying a premium in the secondary market.
For the government, the record oversubscription reflects robust domestic liquidity and strong investor confidence in long-term paper. Net proceeds of KSh 94.64 billion will finance infrastructure projects in transport, energy, and water.
The CBK is set to release the September bond issuance calendar in the coming weeks. Market focus will be on whether a tap sale of the August IFB will be added, potentially absorbing part of the record-breaking excess demand.
