Fixed Income Market Update – Week Ending 27th June 2025

T-Bills Auction Performance: First Undersubscription in 8 Weeks

The Treasury bill auction witnessed a shift in sentiment, registering an undersubscription for the first time in eight weeks. The overall subscription rate fell to 60.4%, down from 114.1% the previous week, indicating reduced investor appetite, particularly for the shorter-tenor paper.

• 📉 91-day T-bill: Subscription dropped to 36.2% (from 93.6%), with bids totaling KES 1.4 billion against an offer of KES 4.0 billion.
• 📉 182-day T-bill: Subscription rate slipped to 12.0%, from 26.1% the prior week.
• 📉 364-day T-bill: Remained the most attractive, though its subscription rate declined to 118.4%, from 210.4% last week.

The government accepted KES 14.4 billion out of KES 14.5 billion in bids—an impressive acceptance rate of 99.7%.

T-Bill Yields Continue Downward Trend

The yields on government papers extended their declining trend, with the largest drop recorded on the 91-day paper:

• 🔻 91-day: 8.14% (-3.0 bps)
• 🔻 182-day: 8.46% (-1.5 bps)
• 🔻 364-day: 9.72% (-1.7 bps)

Bond Market Issuance

In the primary bond market, the government reopened two infrastructure bonds targeting KES 50.0 billion for budgetary support:

• 📌 FXD1/2018/020 (13.2% coupon, 12.8 years to maturity)
• 📌 FXD1/2018/025 (13.4% coupon, 18.0 years to maturity)

📅 The sale period runs from 24th June to 9th July 2025.

Interbank Liquidity Conditions

Liquidity conditions tightened marginally during the week:

• 🔼 Average interbank rate: Rose slightly by 2.2 bps to 9.7%
• 🔼 Interbank volumes: Surged 415.7% to KES 23.0 billion, up from KES 4.5 billion—likely reflecting quarter-end flows and intensified interbank borrowing.

Eurobond Market Performance

Yields on Kenya’s Eurobonds continued to decline, supported by improved sentiment in global markets:

• 🔻 The 10-year Eurobond (2018) led the decline, shedding 20.8 bps to settle at 8.3%, down from 8.5% the prior week.

Currency & Reserves

• 💱 The Kenyan Shilling remained stable, appreciating slightly by 1.5 bps against the US Dollar to close the week at KES 129.3.
• 📉 Forex reserves edged down 0.2% to USD 10.9 billion (equivalent to 4.9 months of import cover)—comfortably above both the statutory threshold (4.0 months) and the EAC convergence criteria (4.5 months).