Kenya Fixed Income Weekly Update – Week Ending 30th May 2025

T-Bills: Demand Surges Amid Declining Yields
The T-bills market posted a strong oversubscription for the fourth consecutive week, with an overall subscription rate of 229.6%, a significant rise from 142.4% the week before. Investor preference continues to skew heavily toward short-term tenors:

• The 91-day paper saw exceptional demand, attracting Kshs 19.2 billion against an offer of Kshs 4.0 billion—a subscription rate of 480.0%.
• The 182-day paper dipped in demand to 97.7%, down from 113.9%.
• The 364-day paper rebounded to a subscription rate of 261.3%, from 182.7% last week.

The government accepted Kshs 43.7 billion out of Kshs 55.1 billion in total bids, marking an acceptance rate of 79.3%.

T-Bill Yields Edge Lower
Yields declined marginally across the board:

• 91-day: down 3.0 bps to 8.29%
• 182-day: down 1.1 bps to 8.56%
• 364-day: remained at 10.00%

This suggests continued investor confidence in short-term government securities despite slightly reduced returns.

Liquidity: Slight Easing in Money Markets
The money markets exhibited slightly improved liquidity:

• Interbank rate eased to 9.8%, down from 9.9%
• Interbank volumes rose by 28.1%, averaging Kshs 6.5 billion

Eurobonds: Yield Compression Across the Curve
Kenya’s Eurobond yields trended downward, with the 10-year 2018 issue registering the largest decline of 52.9 bps, closing at 8.7%. This reflects improving investor sentiment amid a stabilizing macroeconomic outlook.

Currency & Forex Reserves
The Kenya Shilling appreciated slightly, closing the week at Kshs 129.2/USD, up from 129.3.
Forex reserves rose 1.5% to USD 10.5 billion, translating to 4.7 months of import cover—well above the 4-month legal minimum.

Macroeconomic Insights: Revenue & Inflation Trends

• Revenue collection for the first 10 months of FY’2024/2025 stood at Kshs 1.94 trillion, achieving 75.2% of the annual target and 90.2% of prorated estimates—indicating strong fiscal mobilization.
• Inflation eased to 3.8% in May 2025, down from 4.1% in April. Key drivers included rising costs in Food (6.3%), Transport (2.3%), and Housing & Utilities (0.8%).

Final Note:

Despite moderating yields, investor confidence in government securities remains resilient, likely driven by macroeconomic stability signals, controlled inflation, and adequate forex reserves. The heavy preference for short-term instruments suggests a cautious stance amid monetary tightening risks or short-term liquidity needs.