Kenya Fixed Income Market Update – 17th October 2025

Money Markets and T-Bills Primary Auction

The Kenyan government securities market sustained positive momentum, with T-bills oversubscribed for the second consecutive week, underscoring continued investor appetite for short-term instruments amid a stable interest-rate environment.

The overall subscription rate stood at 114.7%, higher than the 106.9% recorded the previous week. Demand was concentrated in the 364-day paper, which attracted bids worth Kshs 42.7 bn against Kshs 20.0 bn on offer, translating to a 213.5% subscription rate (up from 192.0% the previous week). Conversely, the 91-day and 182-day papers recorded subscription rates of 91.0% and 25.5%, respectively.

The government accepted Kshs 27.3 bn of the Kshs 27.5 bn bids received, reflecting a high acceptance rate of 99.1%.

Yields continued to decline across all tenors, consistent with the Central Bank’s recent easing stance and improving liquidity conditions:

• 91-day: 7.86% (↓ 3.2 bps)
• 182-day: 7.91% (↓ 2.1 bps)
• 364-day: 9.36% (↓ 2.6 bps)

The softening in yields highlights reduced investor inflation expectations and confidence in the CBK’s inflation-anchored policy path.

Primary Bond Market

The Central Bank of Kenya (CBK) released auction results for the reopened Treasury bonds FXD1/2018/015 and FXD1/2021/020, offering tenors to maturity of 7.7 years and 15.9 years and fixed coupon rates of 12.7% and 13.4% respectively.

The bonds were heavily oversubscribed, posting an overall subscription rate of 237.8%, with bids worth Kshs 118.9 bn against the Kshs 50.0 bn on offer. The government accepted Kshs 85.3 bn, representing an acceptance rate of 71.7%.

The weighted average yields for accepted bids were:

• FXD1/2018/015: 12.7%
• FXD1/2021/020: 13.5%

These levels were notably lower than the 14.3% and 14.0% recorded during their previous reopenings, indicating declining borrowing costs and renewed investor confidence in fiscal management.

With headline inflation at 4.6% (September 2025), the real returns stand at approximately 8.1% and 8.9% for the respective bonds. Accounting for withholding tax differentials, the tax-equivalent yields rise to 13.4% and 14.0%, remaining attractive relative to current money-market rates.

Liquidity and Interbank Market

Liquidity conditions eased modestly, supported by government disbursements that offset tax remittances. The average interbank rate declined by 21.6 bps to 9.3%, from 9.5% the previous week.

However, average interbank volumes traded halved, dropping 50.5% to Kshs 7.9 bn from Kshs 15.9 bn, indicating a quieter trading week as banks held comfortable liquidity buffers after recent inflows.

Kenya Eurobonds

Yields on Kenya’s Eurobonds posted mixed performance, with marginal changes across the curve. The 13-year Eurobond (2021 issue) edged up by 2.8 bps to 8.6%, while the 30-year Eurobond (2018 issue) eased 4.4 bps to 9.4%. The flattening of the long-end yield curve suggests improving investor sentiment and stable sovereign risk perception following recent policy and debt-management actions.

Kenya Shilling and Forex Reserves

The Kenya Shilling remained broadly stable, appreciating marginally by 0.3 bps to close the week at Kshs 129.2/USD, supported by steady diaspora inflows and improved FX reserves.

Kenya’s foreign-exchange reserves increased sharply by 7.5% to USD 12.1 bn, equivalent to 5.3 months of import cover, well above both statutory and EAC convergence requirements. The rise was primarily driven by external inflows, including Eurobond proceeds and disbursements from multilateral and bilateral partners, bolstering the CBK’s buffer and easing pressure on the currency.

Weekly Highlight: Fuel Price Review (15 Oct – 14 Nov 2025)

The Energy and Petroleum Regulatory Authority (EPRA) maintained fuel prices unchanged for the current review period:

• Super Petrol: Kshs 184.5/litre
• Diesel: Kshs 171.5/litre
• Kerosene: Kshs 154.8/litre

Average landing costs showed mixed movements:

• Super Petrol: ↓ 0.1% to USD 620.2 per m³
• Diesel: ↑ 1.6% to USD 623.8 per m³
• Kerosene: ↑ 3.0% to USD 627.7 per m³

The Kenyan Shilling appreciated slightly to Kshs 129.5 in September, maintaining price stability in the domestic fuel market and cushioning consumers against global price volatility.

Outlook

Kenya’s fixed-income market remains anchored by declining yields, ample liquidity, and a stable macroeconomic environment. The sustained oversubscription in both T-bills and bonds reflects strong investor confidence and favorable inflation dynamics.

With the CBK’s policy stance remaining accommodative and external inflows strengthening reserves, the near-term outlook for interest-bearing assets is positive, though investors will continue monitoring global monetary policy shifts and fiscal developments for direction.

Sources: Central Bank of Kenya (CBK), EPRA, National Treasury