Kenya Fixed Income Weekly Update – Week Ending 21st March 2025

T-Bills Market Performance

T-Bills remained oversubscribed for the 7th consecutive week, with the overall subscription rate rising to 129.0%, up from 122.7% the previous week. However, investor appetite shifted toward longer-term papers:

• 91-day paper: Undersubscribed at 43.2%, a major drop from last week’s 188.1% subscription.
• 182-day paper: Slight dip to 84.0% from 98.0%.
• 364-day paper: Strong demand, oversubscribed at 208.2%, up from 121.1%.

The government accepted Kshs 24.5 bn out of Kshs 31.0 bn in bids, an acceptance rate of 79.0%.

T-Bill Yields Movement

Yields on short-term government securities trended downward, with the largest drop seen in the 91-day paper:

Government Revenue Update

According to the National Treasury’s gazette notice for the first 8 months of FY 2024/2025, total revenue collected by 28th February 2025 stood at Kshs 1,403.7 bn, which is:

• 56.7% of the revised annual estimate (Kshs 2,475.1 bn)
• 85.1% of the prorated target (Kshs 1,650.0 bn)

Money Market Liquidity

Liquidity conditions tightened slightly:

• Interbank rate rose marginally by 1.3 bps to 10.7%
• Interbank volumes declined significantly by 60.4%, averaging Kshs 8.7 bn (from Kshs 21.8 bn), attributed to tax remittances despite government payments.

Eurobond Yields – Mixed Movements

Kenya’s Eurobond yields recorded mixed performance:

• 13-year bond (2021 issue): Yield rose by +0.2% to 10.3%
• 7-year bond (2024 issue): Yield fell by -0.2% to 9.7%

Currency Watch – KES vs USD

• The Kenyan Shilling appreciated slightly by 8.6 bps, moving to Kshs 129.4/USD from 129.5.
• YTD, the shilling has depreciated by 6.8 bps, following a strong 17.4% appreciation in 2024.

Meanwhile, forex reserves declined by 0.5% to USD 10.0 bn, equivalent to 5.1 months of import cover, which is still above the statutory 4.0-month minimum.

Key Insights:

• There’s a growing shift away from short-term papers, suggesting changing investor sentiment.
• Revenue performance is still behind prorated targets, suggesting fiscal pressure.
• Money market liquidity is tight, likely to impact short-term borrowing and investment rates.
• The KES remains stable, but FX reserves have started to decline, something to watch in coming weeks.

KenyaEconomy #FixedIncomeUpdate #TBillWatch #Eurobonds #KenyaFinance