Kenya Fixed Income Market Review 2025 & Weekly Update – 2 January 2026

Executive Summary

Kenya’s fixed income market closed 2025 on a significantly more stable footing compared to 2024, marked by easing inflation, improved currency stability, declining yields, and sustained investor appetite for government securities. The year was characterized by strong demand for Treasury instruments, falling yields across the curve, improved liquidity conditions, and tightening Eurobond spreads, reflecting improved macroeconomic confidence.

The first auction of 2026 reinforced these trends, with Treasury Bills returning to oversubscription after two weak weeks, signaling renewed investor participation at prevailing lower yields.

Treasury Bills Market: 2025 in Review

Subscription Trends

During 2025, Treasury Bills were consistently oversubscribed, with an overall subscription rate of 135.6%, albeit lower than 153.3% in FY’2024. The moderation reflects both lower yields and reduced risk premiums demanded by investors as macroeconomic conditions stabilized.

• 91-day paper remained the most sought-after, attracting bids worth Kshs 423.5 bn against an offer of Kshs 208.0 bn, translating to a 203.6% subscription rate.
• Demand for 364-day paper strengthened, with subscription rising to 175.0%, up from 103.0% in FY’2024, as investors gradually extended duration amid falling yield volatility.
• Conversely, 182-day paper demand softened, with subscriptions declining to 69.1% from 104.9% in FY’2024.

Yield Performance

Treasury Bill yields declined sharply year-on-year:

• 91-day yield: fell by 6.9 percentage points to an average of 8.3% (from 15.2% in 2024)
• 182-day yield: declined by 7.2 percentage points to 8.6% (from 15.7%)
• 364-day yield: dropped by 6.1 percentage points to 10.0% (from 16.0%)

By year-end:

• 91-day closed at 7.7%
• 182-day closed at 7.8%
• 364-day closed at 9.2%

The decline in yields reflects lower inflation, improved liquidity, a stronger shilling, and reduced risk perceptions, allowing investors to accept lower returns without demanding additional compensation.

The average acceptance rate increased to 88.7% (from 77.3% in FY’2024), with the government accepting Kshs 1.50 tn of Kshs 1.69 tn bids received, highlighting a more accommodative borrowing strategy aimed at containing funding costs.

Weekly Treasury Bills Update (Week Ending 2 January 2026)

Treasury Bills were oversubscribed for the first time in three weeks, with the overall subscription rate rebounding to 108.0%, from 22.5% in the prior week.

• 91-day paper attracted bids worth Kshs 6.3 bn against Kshs 4.0 bn, translating to a 158.2% subscription rate
• 182-day paper surged to 112.9%, from 7.1%
• 364-day paper improved to 83.0%, from 22.8%

The government accepted Kshs 25.91 bn of bids (acceptance rate: 99.97%).

Yields remained largely stable, underscoring a market approaching equilibrium:

• 91-day: marginally higher at 7.7%
• 182-day: unchanged at 7.8%
• 364-day: marginally lower at 9.2%

Treasury Bonds: Primary Market Performance in 2025

Primary Treasury bond auctions in 2025 were strongly oversubscribed, with total bids of Kshs 1.69 tn against an offer of Kshs 755.0 bn, translating to an oversubscription rate of 224.1%, higher than 171.1% in 2024.

The government accepted Kshs 1.11 tn, resulting in an acceptance rate of 65.6%, reflecting selective issuance and disciplined cost management amid ongoing fiscal consolidation efforts.

Secondary Bond Market Activity

Secondary market activity strengthened notably toward year-end:

• December 2025 turnover increased by 19.2% to Kshs 230.4 bn, from Kshs 193.4 bn in November
• Year-on-year turnover surged by 91.8%, reflecting increased trading activity, largely driven by commercial banks repositioning portfolios amid declining yields

This pickup indicates improved market depth and confidence, with participants actively managing duration exposure.

Liquidity Conditions

2025 Overview

Liquidity conditions eased materially during the year:

• Average interbank rate declined to 9.9%, from 13.0% in 2024
• Average interbank volumes fell by 48.2% to Kshs 13.8 bn, indicating improved cash availability and reduced overnight funding stress

Week Ending 2 January 2026

• Interbank rate remained stable at 9.0%
• Volumes dipped marginally to Kshs 9.6 bn

The environment continues to support lower funding costs and stable money market conditions.

Eurobond Market: 2025 Performance

Kenya’s Eurobond yields compressed significantly in 2025, reflecting improved external buffers, lower inflation expectations, and better investor sentiment toward frontier markets.

Key movements:

• 7-year (2024 issue): declined to 7.1% from 10.1%
• 10-year (2018 issue): fell to 6.0% from 9.1%
• 12-year (2021 issue): declined to 7.8% from 9.5%
• 13-year (2021 issue): recorded the largest drop, falling 301 bps to 6.0%

The 30-year bond saw a modest increase relative to shorter tenors, reflecting persistent long-term risk pricing.

Weekly Update

During the week, the 7-year Eurobond yield declined by 10.9 bps to 7.1%, reinforcing the broader downward trend.

Outlook

As Kenya enters 2026, the fixed income market is positioned for continued stability rather than aggressive yield compression. With yields already significantly lower, future movements are likely to be driven by:

• Fiscal discipline and borrowing needs
• Inflation trajectory
• External financing flows and global interest rate dynamics

Overall, 2025 marked a turning point for Kenya’s fixed income market, shifting from stress and volatility toward normalization and improved investor confidence.

Sources: Central Bank of Kenya (CBK), Business Daily