Kenya Fixed Income Market Update — 5th December 2025

1. Money Markets & T-Bills Auction

T-bills remained firmly in demand for the ninth consecutive week, with the overall subscription rate rising to 220.2%, up from 186.7% the previous week.
Investor behavior continued to shift within the short-term curve:

• 91-day paper: Subscription fell to 212.2% (from 448.6%), signalling a modest rotation away from ultra-short duration.
• 182-day paper: Jumped sharply to 140.0% (from 5.2%), indicating renewed appetite for mid-tenor bills.
• 364-day paper: Increased to 303.7% (from 263.5%), sustained by investors locking in near-peak yields ahead of expected rate normalization in 2026.

The government accepted Kshs 40.4 bn of the Kshs 52.9 bn submitted bids, an acceptance rate of 76.4%, reflecting continued issuance discipline as CBK aims to optimise cost-of-borrowing while managing rollover risk.

Yields remained broadly stable, reflecting a market in consolidation mode:

• 91-day: 7.780% (+0.1 bps)
• 182-day: 7.804% (+0.4 bps)
• 364-day: 9.370% (-0.8 bps)

The marginal movements indicate that short-term interest rates may have reached a near-term equilibrium, supported by easing inflation and CBK’s gradual policy normalization.

2. Treasury Bonds: Auctions & Pricing Trends

CBK released results for the reopened SDB1/2011/030 (15.2 years) and FXD1/2021/025 (20.4 years). The auction saw strong uptake, with a subscription rate of 132.8% as investors sought long-duration assets amidst stable inflation.

• Bids received: Kshs 53.1 bn
• Accepted: Kshs 47.1 bn (Acceptance rate: 88.7%)

Weighted Average Yields (WAY):

The lower yields relative to prior reopenings signal improved investor confidence, supported by:

• Stable inflation at 4.5%,
• Sustained improvement in liquidity conditions,
• Declining Eurobond yields.

Real returns remain attractive:

• SDB1/2011/030: 8.8%
• FXD1/2021/025: 9.1%

Accounting for the 10% withholding tax on bonds, the tax-equivalent yields for short-term investors (15% WHT) stand at:

• 14.1% for SDB1/2011/030
• 14.4% for FXD1/2021/025

3. Liquidity & Interbank Market

Market liquidity tightened slightly:

• Interbank rate: 9.2% (-0.3 bps)
• Interbank volumes: Kshs 11.9 bn (-27.0%)

The squeeze was driven by tax remittances, though government payments partly offset the strain. Overall funding conditions remain manageable and consistent with CBK’s monetary stance.

4. Kenya Eurobonds

Eurobond yields continued trending downward, supported by improving global risk sentiment and Kenya’s strengthening macro signals.

• The largest decline was on the 12-year 2019 Eurobond, whose yield fell 46.1 bps to 7.7% (from 8.2%).

This reflects:

• Stable FX reserves above statutory levels,
• Easing inflation,
• Reduced near-term refinancing concerns following Kenya’s proactive debt-management operations earlier in the year.

5. Currency Market — Kenya Shilling

The Kenya Shilling strengthened modestly:

• Kshs 129.3 per USD (from 129.9)
• Weekly appreciation: 39.3 bps
• YTD performance: –0.3% (vs +17.6% in 2024)

The improvement was driven by:

• Resilient diaspora inflows,
• Increased tourism receipts,
• Reduced corporate dollar demand.

Forex reserves stood at USD 12.0 bn, equivalent to 5.2 months of import cover—comfortably above both CBK (4.0 months) and EAC (4.5 months) thresholds.

6. Weekly Highlights — Stanbic Bank PMI (Nov 2025)

November’s Purchasing Managers Index (PMI) rose to 55.0, up from 52.5 in October, marking the:

• 3rd consecutive month of expansion
• highest level in 21 months

Key Drivers of the improvement

✔ Strong Output Growth

All major sectors—manufacturing, agriculture, services, retail—reported increased activity as demand strengthened.

✔ Rising New Orders

New business expanded for the second straight month, boosted by promotional pricing and new client acquisitions.

✔ Improved Employment Trends

Firms maintained hiring momentum to support growing workloads, building on October’s strong employment gains.

✔ Better Supply Chain Efficiency

Shorter delivery times resulted from increased vendor competition and improved logistics performance.

✔ Mild Input Cost Inflation

Cost pressures remained contained due to stable fuel prices, easing inflation (4.5%), and improving supply conditions.

✔ Inventory Rebuilding

Businesses increased procurement in anticipation of stronger end-year demand cycles.

📌 Summary View

Kenya’s fixed-income market continues to show strong investor appetite, supported by:

• Stable macro conditions,
• Easing inflation,
• Firming shilling,
• Robust Eurobond performance, and
• Improving business activity (PMI at 55.0).

The shift in T-bill demand toward longer short-term tenors (182-day & 364-day) suggests investors are gradually positioning for a plateauing rate environment and improved confidence in Kenya’s near-term fiscal trajectory.

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