Kenya Fixed Income Market Update – 15th August 2025

T-Bills Primary Auction

The T-bills market remained under pressure, recording its third consecutive undersubscription. Overall subscription stood at 96.6%, a slight dip from 97.6% the previous week.

• 91-Day Paper: Strong investor preference persisted, with bids amounting to Kshs 4.9 bn against Kshs 4.0 bn offered, translating to 123.2% subscription (up from 99.7% the previous week).
• 182-Day Paper: Demand edged higher to 74.6% (Kshs 7.5 bn vs Kshs 10.0 bn), from 74.1% previously.
• 364-Day Paper: Subscription moderated to 108.0% (Kshs 10.8 bn vs Kshs 10.0 bn), compared to 120.2% the previous week.

The government accepted nearly all bids — Kshs 23.16 bn out of Kshs 23.18 bn received — reflecting a 99.9% acceptance rate.

Yields continued their downward trend across all maturities:

• 91-day: 8.0% (-6.9 bps)
• 182-day: 8.1% (-5.4 bps)
• 364-day: 9.6% (-13.1 bps, largest drop)

➡️ The yield curve movement reflects improved liquidity and moderated inflation expectations, consistent with the recent MPC policy direction.

Money Market Liquidity

Liquidity conditions eased slightly, with the average interbank rate falling by 7.2 bps to 9.5%, from 9.6% the previous week. The easing was supported by government payments, though partially offset by tax remittances.

Interbank trading volumes rose 27.5% to Kshs 9.8 bn, from Kshs 7.7 bn the week prior, signaling improved interbank activity.

Eurobond Performance

Kenya’s Eurobonds were on a downward yield trajectory, reflecting improved investor sentiment and demand for frontier market debt.

• 13-year Eurobond (2021 issue): Yield declined the most, by 35.2 bps to 9.4% (from 9.8%).
• 30-year Eurobond (2018 issue): Yield fell modestly, by 11.3 bps to 10.0%.

➡️ The spread compression indicates a continued recovery in sovereign credit outlook, albeit with caution given global market uncertainties.

Kenya Shilling & Forex Reserves

The Kenya Shilling remained broadly stable, depreciating marginally by 0.1 bps to Kshs 129.2 per US Dollar. Year-to-date, the shilling has strengthened 5.1 bps against the dollar, though at a slower pace than the 17.6% appreciation recorded in 2024.

Forex reserves increased by 2.0% to USD 11.1 bn, equivalent to 4.9 months of import cover. This remains comfortably above:

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

Weekly Highlights

1. MPC Policy Rate Cut (August Meeting)

The Monetary Policy Committee (MPC) met on 12th August 2025 against a backdrop of global uncertainty — moderating inflation in advanced economies, trade frictions, and persistent geopolitical risks.

• The MPC cut the Central Bank Rate (CBR) by 25 bps to 9.50%, from 9.75% in June 2025.
• This follows a cumulative 50 bps easing since April 2025 (from 10.00%).
• Inflation remains anchored within the CBK’s 2.5%–7.5% target range, coming in at 4.1% in July 2025 (up from 3.8% in June 2025), marking 25 consecutive months within target.

➡️ The back-to-back rate cuts underscore the CBK’s accommodative stance to support growth amid subdued private sector activity.

2. Fuel Price Review (15th Aug – 14th Sep 2025)

EPRA announced revised maximum fuel prices effective 15th August – 14th September 2025:

• Super Petrol: Kshs 185.3 (↓ Kshs 1.0 / -0.5%)
• Diesel: Kshs 171.6 (unchanged)
• Kerosene: Kshs 155.6 (↓ Kshs 1.0 / -0.6%)

Notable trends:

• Landing costs: Kerosene and Diesel rose 3.2% and 3.1% respectively, while Petrol declined 0.7%.
• The shilling remained stable, appreciating marginally by 3.1 bps month-on-month to Kshs 129.6.

➡️ The marginal price cuts reflect currency stability cushioning higher international landing costs.

3. July Exchequer Report

The National Treasury released fiscal data for July 2025 (first month of FY’2025/26):

• Total revenue: Kshs 178.4 bn (6.5% of FY target; 77.7% of prorated estimates).
• Tax revenue: Kshs 171.5 bn (6.5% of FY target; 78.4% of prorated).
• Total financing: Kshs 67.3 bn (4.0% of FY target; 48.1% of prorated), all from domestic borrowing.
• Total expenditure: Kshs 229.2 bn (5.2% of FY target; 62.0% of prorated).

➡️ Revenue underperformance highlights a challenging business environment, consistent with the weak PMI (46.8 in July, third consecutive month below 50). Expenditure execution also lagged, suggesting fiscal pressures may persist if revenue mobilization does not improve.

📊 Sources: Central Bank of Kenya (CBK), National Treasury, EPRA, MPC August Statement