After peaking above 16% in 2024, Kenya’s Treasury bill rates have retraced sharply, returning to four-year lows as easing inflation and central bank rate cuts restore pre-tightening conditions in the money market.
- •By early January 2026, yields across all T-bill tenors had fallen back to levels last seen in late 2021. The 91-day bill stood at 7.73%, the 182-day at 7.80%, and the 364-day at 9.21%.
- •Each rate declined by more than 200 basis points over the past year, marking one of the fastest reversals in Kenya’s recent fixed-income history.
- •The scale of the move reflects a full unwind of the aggressive tightening cycle deployed between 2022 and 2024. At the peak, the 91-day bill traded above 16.7% in April 2024, while the 182-day and 364-day bills climbed to about 16.9% in August.
Those levels priced in elevated inflation, currency pressure, and heavy government borrowing needs.
Rates began falling steadily from late 2024 and accelerated through 2025. On a year-on-year basis, the 91-day bill fell by 217 basis points, the 182-day by 222 basis points, and the 364-day by 233 basis points. Short-dated paper led the rally, with volatility collapsing by mid-2025 as weekly auction movements narrowed to single-digit basis points.
Several forces drove the decline. The Central Bank of Kenya delivered a sustained easing cycle through 2024 and 2025, cutting the policy rate for record 9 consecutive meetings as inflation retreated toward the midpoint of the official target range. Lower policy rates pulled down interbank funding costs and reset pricing expectations across the short end of the yield curve.
Inflation dynamics played a central role. Headline inflation slowed materially from 2024 highs, reducing the compensation investors demanded on short-term government paper. Stable food prices, easing fuel pressure, and a firmer shilling helped anchor expectations, allowing nominal yields to compress without eroding real returns as sharply as in prior cycles.
Liquidity conditions also improved. Banking-system liquidity rose through 2025 as private-sector credit growth moderated and fiscal cash-flow pressures eased. With fewer attractive alternatives at the short end, demand for T-bills remained firm even as yields declined. Oversubscription persisted in several auctions, particularly for the 91-day tenor.
Auction management reinforced the trend. The central bank consistently rejected high-yield bids, signalling tolerance for lower funding costs and enforcing yield discipline. This stance limited upward spikes and encouraged bidders to recalibrate expectations, accelerating the move toward lower clearing rates.
The result has been a clear re-steepening of the curve at lower absolute levels. The spread between the 364-day and 91-day bills now sits near 150 basis points, down from more than 300 basis points at the 2024 peak. The curve remains positively sloped, yet pricing reflects confidence in stable short-term funding conditions rather than stress.
Historically, the current levels matter. The 91-day rate last traded near 7.7% in December 2021. The 182-day reached comparable levels in November 2021, while the 364-day last sat near 9.2% in December of the same year. In effect, the market has erased four years of tightening in less than eighteen months.
