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Fixed Income Market Update – Week Ending 11th April 2025
The Kenyan fixed income market remained active this week, with investors continuing to show strong appetite for short-term government securities and key policy shifts shaping the macroeconomic landscape.
T-Bills Market Performance
T-bills were oversubscribed for the second week in a row, posting an overall subscription rate of 224.0%, up from 169.5% the previous week.
| Tenor | Subscription Rate | Yield This Week | Yield Last Week | Change (bps) |
|---|---|---|---|---|
| 91-Day | 435.4% | 8.5% | 8.6% | ▼12.9 |
| 182-Day | 110.7% | 8.9% | 9.0% | ▼14.1 |
| 364-Day | 252.7% | 10.2% | 10.4% | ▼15.5 |
🔹 Investor appetite remained strongest for the 91-day paper, likely reflecting continued preference for liquidity amid rate volatility.
🔹 The government accepted Kshs 43.5 bn worth of bids from the Kshs 53.8 bn received, translating to an 81.0% acceptance rate.
Bond Market – Tap Sale FXD1/2020/15
The CBK reopened the FXD1/2020/15 through a Tap Sale, and the bond was oversubscribed with a subscription rate of 132.4%.
- Amount Offered: Kshs 10.0 bn
- Bids Received: Kshs 13.2 bn
- Bids Accepted: Kshs 12.6 bn
- Acceptance Rate: 95.1%
- Average Yield: 13.7%
- Coupon Rate: 12.8%
- Real Return (adjusted for inflation): 10.1% (based on March 2025 inflation of 3.6%)
The strong uptake reflects investor confidence in longer-dated instruments, especially given stabilizing interest rate expectations.
Monetary Policy Committee (MPC) Decision
On April 8th, 2025, the Central Bank of Kenya’s Monetary Policy Committee cut the Central Bank Rate (CBR) by 75.0 basis points, lowering it from 10.75% to 10.00%.
🔸 This decision comes amid:
- Global growth uncertainties
- Lower but sticky inflation in advanced markets
- Persistent geopolitical tensions
- A need to stimulate domestic credit uptake
The move aligns with market expectations and signals a shift toward a more accommodative monetary stance following successive rate hikes in 2023–2024.
Summary Takeaway
- Investors are shifting toward shorter-term instruments, evidenced by the high 91-day subscription.
- Declining T-bill yields may pressure MMF returns in the coming weeks.
- The CBR rate cut is likely to stimulate lending and reduce borrowing costs, but may also impact future fixed income yields.
- Bond market performance remains resilient, with investors continuing to favor stable long-term returns.