Kenya Fixed Income Market Update – 26th September 2025

Treasury Bills (T-Bills) Primary Auction

The T-bills market remained subdued, marking the second consecutive week of undersubscription. The overall subscription rate came in at 62.9%, lower than the 95.7% recorded the previous week.

• 91-day paper: Investor appetite weakened considerably, with subscriptions falling to 40.5% (Kshs 1.6 bn bids against Kshs 4.0 bn on offer), compared to 106.2% the previous week.
• 182-day paper: Subscriptions dropped sharply to 19.4% from 55.8% previously.
• 364-day paper: Demand moderated, with subscriptions at 115.3%, down from 131.3%.

The government accepted Kshs 15.0 bn of bids against Kshs 15.1 bn received, translating to an acceptance rate of 99.3%.

Yields trended downward across the curve, reflecting easing pressure on short-term borrowing costs:

• 91-day: 7.91% (-3.2 bps)
• 182-day: 7.99% (-2.5 bps)
• 364-day: 9.53% (-0.4 bps)

This indicates that despite weak investor demand, the government is managing to refinance at slightly lower costs, possibly reflecting excess liquidity chasing medium- to longer-term assets.

Treasury Bonds (T-Bonds) Primary Market

The government reopened two benchmark bonds seeking to raise Kshs 50.0 bn:

• FXD1/2018/015: 7.7 years to maturity, fixed coupon 12.7%
• FXD1/2021/020: 15.9 years to maturity, fixed coupon 13.4%

The sale period opened on 26th September 2025 and will close on 15th October 2025.
Recommended bidding ranges:

• FXD1/2018/015: 12.75% – 13.50%
• FXD1/2021/020: 13.50% – 14.50%

The reopening offers investors a medium- and long-duration opportunity to lock in attractive real returns, particularly against a backdrop of easing inflation (4.5% in August 2025).

Money Market Liquidity

Liquidity in the interbank market tightened marginally, with the average interbank rate edging up by 1.2 bps to 9.5%, largely unchanged week-on-week. The movement was attributable to tax remittances offsetting government disbursements.

Notably, interbank trading volumes surged by 118.0%, reaching Kshs 17.2 bn compared to Kshs 7.9 bn the prior week. This reflects heightened short-term funding activity among banks despite overall stable interbank rates.

Kenya Eurobonds

Eurobond yields reversed their prior downward momentum, trending upwards during the week. The 12-year Eurobond (2019 issue) recorded the sharpest rise, with yields increasing by 28.1 bps to 8.2%, from 7.9% the previous week.

This uptick suggests renewed investor caution toward frontier market debt amid shifting global risk sentiment.

Kenya Shilling & Forex Reserves

The Kenya Shilling depreciated marginally, closing at Kshs 129.3 against the US Dollar from Kshs 129.2 the prior week. On a year-to-date basis, the shilling has appreciated by 3.4%, though this is a moderation compared to the 17.6% appreciation in 2024.

Forex reserves slipped by 1.2% to USD 10.7 bn from USD 10.9 bn, equivalent to 4.7 months of import cover. While still above the statutory minimum (4.0 months) and the EAC convergence threshold (4.0 months), the decline underscores the importance of managing external balances as Eurobond maturities draw nearer.

Further Insights:

The undersubscription of T-bills signals waning investor appetite for short-dated instruments, likely due to the search for better returns in longer-tenor bonds and money market funds, which remain competitive. Meanwhile, Eurobond yield increases highlight sensitivity to global risk appetite, even as domestic fundamentals remain relatively stable.

KenyaEconomy #FixedIncome #T-Bills #Eurobonds #KenyaShilling #InvestSmart #FinancialMarkets #InvestmentInsights #BondMarkets #EconomicUpdate