As the new fiscal year approaches, investor interest in Kenya’s short-term debt appears to be shifting toward longer bonds, as indicated by the results of the latest T-Bills auction.
- •The Central Bank of Kenya (CBK) accepted KSh 14.44 billion from KSh 14.49 billion in bids during the June 30 auction.
- •However, the 91-day and 182-day papers were undersubscribed, receiving KSh 1.44 billion and KSh 1.20 billion against offers of KSh 4 billion and KSh 10 billion, respectively.
- •In contrast, the 364-day bill was oversubscribed, attracting KSh 11.84 billion in bids versus the KSh 10 billion offer.
Notably, yields fell slightly across all tenors. The 91-day dropped to 8.1387%, the 182-day to 8.4613%, and the 364-day to 9.7221%. These lower returns, following CBK’s recent policy rate cut, appear to be encouraging investors to seek better yields elsewhere.
CBK recently reopened two long-term bonds for FY2025/26. It aims to raise KSh 50 billion through FXD1/2018/020 and FXD1/2018/025, with remaining tenors of 12.8 and 18 years. The bonds offer fixed coupons of 13.20% and 13.40%. As a result, analysts expect strong interest from pension funds and insurers.
The government targets KSh 635 billion in net domestic borrowing for FY2025/26. Given the market’s growing preference for long-term bonds, this strategy could receive timely support. This week’s T-bill auction raised KSh 9.70 billion in net new borrowing—useful for near-term financing, though it falls short of signaling strong short-term debt appetite.
With FY2025/26 starting next week, the July 9 bond auction will offer a clearer signal. It may indicate whether investors are ready to commit to longer-term debt as their preferred strategy moving forward.
