Kenya used a bond switch auction in January 2026 to extend domestic debt repayments into 2037, rolling over maturing obligations without raising fresh cash as refinancing pressure mounted.
- •The transaction was only the third bond switch on record and reinforced Treasury’s growing reliance on liability-management tools to smooth redemptions and lengthen maturities.
- •The January 21 operation exchanged holdings of the August 2026 bond, FXD1/2016/010, into the longer-dated FXD1/2022/015, which matures on April 6, 2037 and has 11.3 years remaining to maturity.
- •Treasury offered KSh 20.0 Bn but accepted KSh 25.17 Bn after bids reached KSh 26.49 Bn, resulting in a performance rate of 132.46%.
Competitive bids accounted for KSh 21.71 Bn of the accepted amount, while non-competitive allocations totaled KSh 3.47 Bn. The weighted average yield of accepted bids settled at 13.1669%, below the bond’s coupon rate of 13.942%, producing a premium price of KSh 107.99 per KSh 100. The destination bond qualifies for statutory liquidity requirements and remains eligible for Central Bank of Kenya rediscounting facilities, factors that supported demand despite elevated yields.
The switch did not inject liquidity into government coffers. Participation was voluntary and limited to investors holding unencumbered FXD1/2016/010 securities, allowing Treasury to defer cash repayments ahead of the bond’s August 2026 maturity. Investors could exchange part or all of their holdings, turning an impending redemption into a longer stream of coupon payments.
January’s operation followed two earlier switches that established the framework. In June 2020, Treasury used a six-year bond to refinance KSh 20.23 Bn of maturing obligations during the pandemic, raising less than KSh 1.0 Bn in net new cash. In December 2022, it rolled over KSh 47.75 Bn through a six-year bond maturing in November 2028, converting a mix of Treasury bills and bonds into longer-dated paper at a yield of 13.215%. Together with the January 2026 transaction, the three switches have rolled over more than KSh 90 Bn in domestic debt.
The switches form part of a broader maturity-lengthening strategy. By end-June 2025, the average time to maturity of Kenya’s Treasury bond portfolio had increased to 7.49 years from 7.36 years a year earlier, supported by consistent issuance and reopening of medium- and long-term bonds. Bonds account for about 83% of domestic issuance, reducing reliance on short-term Treasury bills and easing rollover risk.
