Kenya’s domestic debt market kicked off the 2025/26 fiscal year on a bullish note, as investors continued their pivot toward long-term government bonds in search of higher yields and stability.
In its latest bond reopening, the Central Bank of Kenya (CBK) raised KSh 66.65 billion ($514.4 million), surpassing its KSh 50 billion ($385.8 million) target. The strong investor appetite underscores a growing preference for duration amid falling short-term returns and a more accommodative monetary policy stance.
The auction featured two reopened instruments—FXD1/2018/020 (20-year) and FXD1/2018/025 (25-year), which attracted total bids worth KSh 76.91 billion ($593.5 million). The 25-year bond saw a performance rate of 87.7%, outpacing the 20-year bond’s 66.2% performance. Accepted average yields stood at 13.9% and 14.4%, respectively, making the offer especially appealing to pension funds, insurers, and long-term institutional investors.
This comes on the heels of another successful bond reopening on June 23, when the CBK raised KSh 71.64 billion ($552.8 million) against KSh 101.36 billion ($782.2 million) in total bids. That auction, which featured FXD1/2020/015 (15-year) and SDB1/2011/030 (30-year) papers, achieved a remarkable 202.72% performance rate, signaling strong and sustained demand for long-dated assets.
Meanwhile, activity on the shorter end of the curve continues to soften. In the July 7 T-bill auction, CBK accepted KSh 21.77 billion ($168.0 million), but only the 182-day paper was oversubscribed. A week earlier, on June 30, overall subscription levels fell below expectations, with only the 364-day tenor attracting significant demand. Treasury bill yields remain near recent cycle lows, at 8.14% (91-day), 8.46% (182-day), and 9.72% (364-day), following CBK’s recent interest rate cut.
The bond market’s momentum reflects a broader shift in investor strategy. With short-term yields under pressure and ample liquidity in the system, institutions are extending their maturities to lock in double-digit returns. The trend is timely for the National Treasury, which is targeting KSh 635 billion ($4.9 billion) in net domestic borrowing for the 2025/26 fiscal year.
The figures were originally reported in KSh, and have been converted using KSh1 = $0.0077 as of July 9, 2025
