Kenya Weekly Fixed Income Update | 3rd April 2026

Money Market & Treasury Bills Auction

The Treasury bills primary market remained under pressure during the week, recording a second consecutive week of undersubscription. Overall subscription came in at 70.8%, representing an improvement from the 45.5% recorded in the previous week, but still reflecting relatively subdued investor demand for short-term government securities.

Investor appetite continued to shift across the yield curve. Demand for the 91-day paper weakened further, with bids amounting to Kshs 1.2 bn against an offer of Kshs 4.0 bn, translating to a subscription rate of 30.1%, down from 64.9% recorded the previous week. This sustained decline suggests a continued reduction in preference for shorter-duration instruments.

In contrast, demand for longer tenors showed notable recovery. The 182-day paper recorded a significant increase in subscription to 90.9% from 28.3%, while the 364-day paper saw improved uptake, with subscription rising to 67.1% from 54.9% in the previous week. This shift indicates a gradual reallocation of investor interest toward medium- to longer-term instruments, likely in search of relatively stable yields.

The government maintained a high acceptance rate of 99.7%, accepting Kshs 16.95 bn out of Kshs 17.00 bn bids received, highlighting sustained borrowing requirements and the absorption of available market liquidity.

On the yield front, performance was mixed but largely stable, suggesting a relatively balanced interest rate environment. The 91-day yield declined marginally by 2.6 basis points to 7.40%, while the 364-day yield edged down slightly by 0.3 basis points to remain around 8.3%. Meanwhile, the 182-day yield increased marginally by 0.1 basis points, effectively remaining unchanged at approximately 7.8%.

Overall, the market dynamics point to a gradual normalization in investor demand, with a clear rotation away from shorter tenors toward medium-term instruments, while yields remain relatively anchored.

Liquidity & Interbank Market

Liquidity conditions in the money market tightened marginally during the week, largely driven by tax remittances that absorbed liquidity and offset government expenditures. As a result, the average interbank rate increased slightly by 3.1 basis points, remaining broadly stable at 8.7% compared to the previous week.

Despite the mild tightening in liquidity, activity in the interbank market increased notably. The average interbank volumes traded rose by 24.2% to Kshs 17.8 bn, up from Kshs 14.3 bn recorded the previous week. This increase in volumes suggests that banks remained active in managing short-term funding requirements, reflecting continued efficiency and resilience in the interbank market.

Overall Market Outlook

The fixed income market during the week was characterized by continued undersubscription in the Treasury bills market, albeit with signs of improvement, alongside stable yield movements and slightly tighter liquidity conditions.

The shift in investor preference toward the 182-day and 364-day papers suggests a strategic repositioning along the yield curve, as investors seek to optimize returns in a relatively stable interest rate environment. At the same time, persistent weakness in demand for the 91-day paper indicates reduced appetite for shorter-duration exposure.

Looking ahead, investor focus is likely to remain on liquidity conditions, particularly following tax cycles, as well as yield movements across the curve, which will continue to influence allocation decisions. Overall, the market appears to be stabilizing, with gradual improvements in demand likely if current conditions persist.

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