Kenya Fixed Income Market Update – 8th August 2025

T-Bills Primary Auction

The Treasury Bills (T-bills) market remained subdued, recording its second consecutive undersubscription. The overall subscription rate rose to 97.6%, up from 67.1% the previous week, reflecting improved investor participation.

• 91-Day Paper: Investor appetite shifted strongly towards the shortest tenor, with a subscription rate of 99.7% (Kshs 3.98 bn bids against Kshs 4.0 bn offered), compared to 49.3% the previous week.
• 182-Day Paper: Subscription improved sharply to 74.1%, from 21.4% previously.
• 364-Day Paper: Continued strong demand, with a subscription rate of 120.2%, slightly above the 119.8% recorded in the prior week.

The government accepted Kshs 23.2 bn out of the Kshs 24.0 bn bids received, representing an acceptance rate of 99.2%.

Yields trended downward across all maturities:

• 91-day: 8.08% (-3.1 bps)
• 182-day: 8.20% (-23.6 bps, the largest drop)
• 364-day: 9.70% (-0.5 bps, relatively flat)

Money Market Liquidity

Liquidity conditions marginally eased, as reflected in the average interbank rate, which dipped by 0.9 bps to remain stable at 9.6%. This was partly supported by government payments, which offset the impact of tax remittances.

However, interbank trading volumes dropped significantly by 35.5% to Kshs 7.7 bn, from Kshs 11.9 bn the previous week.

Kenya Eurobonds

Eurobond yields exhibited a mixed performance:

• 10-year Eurobond (2018 issue): Yield fell the most, down 16.1 bps to 7.6%.
• 13-year Eurobond (2021 issue): Marginal increase of 0.6 bps, remaining relatively flat at 9.6%.

Kenya Shilling & Forex Reserves

The Kenyan Shilling depreciated marginally by 0.7 bps against the US Dollar to Kshs 129.2. Year-to-date, the shilling has appreciated by 5.1 bps, a moderation compared to the 17.6% appreciation recorded in 2024.

Foreign exchange reserves rose by 1.9% to USD 10.9 bn (equivalent to 4.8 months of import cover), comfortably above:

• The statutory minimum of 4.0 months, and
• The EAC convergence criterion of 4.5 months.

Macro-Economic Highlight – Stanbic Bank PMI

Stanbic Bank’s Purchasing Managers’ Index (PMI) for July 2025 deteriorated to 46.8, down from 48.6 in June 2025, marking the third consecutive month below the neutral 50.0 threshold. This signals worsening business conditions, driven by:

• Weaker order inflows
• Rising input costs
• Operational disruptions from protests

However, compared to July 2024 (43.1), the PMI is 8.6% higher, suggesting a slower pace of decline in output and new orders.

Cost pressures persisted:

• Input prices rose for the sixth consecutive month, attributed to higher purchase prices and increased taxation.
• Output charges also increased in July, reflecting pass-through effects of elevated operating costs.

📊 Source: Central Bank of Kenya (CBK), National Treasury, Stanbic Bank PMI Report

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