Kenya Fixed Income Market Update – 10th October 2025

Treasury Bills Auction Performance

During the week, Treasury bills were oversubscribed for the first time in four weeks, signaling renewed investor appetite for short-term government securities. The overall subscription rate rose to 106.9%, compared to 63.1% recorded the previous week.

Investor preference shifted notably toward the 364-day paper, which received bids worth Kshs 19.2 billion against an offer of Kshs 10.0 billion, translating to a 192.0% subscription rate, up from 73.8% the prior week. Meanwhile, the 91-day paper registered improved performance at 90.0%, up from 40.4%, while the 182-day paper fell to 28.5% from 61.3%.

The government accepted Kshs 25.58 billion out of Kshs 25.64 billion in bids, representing a 99.8% acceptance rate.

Yields across all tenors trended downward, reflecting moderated inflation expectations and the impact of recent monetary policy easing:

• 91-day: decreased by 3.3 bps to 7.89% from 7.92%
• 182-day: decreased by 5.5 bps to 7.93% from 7.98%
• 364-day: decreased by 15.0 bps to 9.39% from 9.54%

The continued moderation in yields highlights investor confidence in near-term macroeconomic stability, supported by improved liquidity conditions and anchored inflation expectations.

Liquidity and Interbank Market

Liquidity in the money markets eased marginally during the week, with the average interbank rate declining by 3.8 bps to remain relatively unchanged at 9.5%. The slight easing was attributed to government disbursements offsetting mid-month tax remittances.

Interbank trading volumes rose modestly by 5.5%, averaging Kshs 15.9 billion, up from Kshs 15.1 billion recorded the previous week — an indicator of healthy interbank activity and stable short-term funding conditions.

Eurobond Market Performance

In the international market, Kenya’s Eurobond yields edged upward, reflecting minor repricing by investors after recent gains. The 13-year Eurobond (2021 issue) recorded the sharpest increase, rising by 17.4 bps to 8.6%, from 8.4% the previous week.

Despite this uptick, Kenya’s Eurobond yields remain well below early-2025 levels, underscoring improved investor sentiment following successful debt management operations and enhanced global demand for frontier market debt.

Kenya Shilling and Forex Reserves

The Kenya Shilling remained broadly stable, appreciating marginally by 0.02 bps to close the week at Kshs 129.2 per USD, maintaining its year-to-date appreciation of 5.1% against the dollar.

Meanwhile, foreign exchange reserves increased by 4.8% to USD 11.2 billion, up from USD 10.7 billion the previous week. This level represents 4.9 months of import cover, comfortably above both the statutory threshold of 4.0 months and the EAC convergence criterion of 4.5 months, reflecting robust external buffers amid a stable macroeconomic environment.

Weekly Highlight: Monetary Policy Committee Decision

The Monetary Policy Committee (MPC) convened on 7th October 2025 against a backdrop of elevated global economic uncertainty, characterized by sticky inflation in advanced economies, trade frictions, and persistent geopolitical tensions.

The MPC lowered the Central Bank Rate (CBR) by 25 basis points to 9.25%, from 9.50%, marking the second rate cut in two months following the August 2025 reduction.

The decision was guided by the need to support domestic credit growth, stimulate private sector activity, and sustain economic momentum amid contained inflation. Kenya’s inflation rate rose slightly to 4.6% in September 2025, from 4.5% in August, remaining within the CBK’s target range of 2.5%–7.5% for the 27th consecutive month.

The cumulative 50 bps easing since June 2025 reflects the MPC’s confidence in the economy’s resilience, anchored inflation expectations, and adequate foreign reserves to cushion external shocks.

Outlook

The fixed income market is expected to remain stable in the short term, supported by:

• Lower policy rates, which may drive mild downward adjustments in T-bill yields,
• Improved liquidity conditions, and
• Sustained investor confidence in Kenya’s fiscal and monetary policy frameworks.

However, the global risk environment — including geopolitical tensions and tightening global financial conditions — remains a key variable influencing foreign investor participation and medium-term yield movements.

Sources: Central Bank of Kenya (CBK), National Treasury, MPC Press Release

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