Kenya Weekly Fixed Income & Macro Market Update | 10th April 2026

Money Market & Treasury Bills Auction

The Treasury bills market recorded a notable recovery during the week, with overall subscription rising to 102.3%, marking the first instance of oversubscription in three weeks. This represents a significant improvement from the 70.8% recorded in the previous week and signals a rebound in investor demand for government securities.

Investor preference shifted markedly toward the shorter end of the yield curve, with demand for the 91-day paper strengthening significantly. The paper received bids worth Kshs 8.0 bn against an offer of Kshs 4.0 bn, translating to a subscription rate of 199.4%, a sharp increase from 30.1% recorded in the previous week. This suggests a renewed preference for short-term instruments, likely driven by liquidity considerations and expectations of stable rates.

Demand for the 182-day paper also improved, with subscription rising to 108.5% from 90.9%, indicating continued interest in medium-term instruments. In contrast, demand for the 364-day paper softened, with subscription declining to 57.2% from 67.1%, suggesting a slight pullback from longer-duration exposure.

The government maintained a near-full acceptance rate of 99.9%, accepting Kshs 24.5 bn out of Kshs 24.6 bn in bids received, reflecting sustained borrowing requirements and the availability of liquidity in the market.

Yields recorded a largely stable but mixed performance. The 91-day yield remained unchanged at 7.4%, while the 182-day and 364-day yields declined marginally by 0.1 and 0.8 basis points, respectively, to remain broadly stable at 7.8% and 8.3%. The stability in yields alongside improved subscription levels suggests a balanced interest rate environment, with demand dynamics adjusting without significant pricing pressure.

Liquidity & Interbank Market

Liquidity conditions in the money market tightened slightly during the week, largely attributable to tax remittances that offset government spending. The average interbank rate increased marginally to 8.8% from 8.7%, indicating mild pressure on short-term liquidity.

At the same time, interbank market activity declined, with average volumes traded decreasing by 25.0% to Kshs 14.0 bn, down from Kshs 18.7 bn recorded the previous week. The decline in volumes alongside stable rates suggests that while liquidity tightened, the market remained relatively well-balanced, with reduced need for interbank borrowing.

Kenya Eurobond Market

Kenya’s Eurobond yields trended downward during the week, reflecting improved investor sentiment toward the country’s external debt. The yield on the 13-year Eurobond issued in 2021 declined significantly by 73.0 basis points to 8.7%, indicating increased demand for Kenya’s sovereign bonds in international markets.

This decline suggests a reduction in perceived risk or improved global investor appetite for emerging and frontier market debt, despite ongoing global uncertainties.

Currency Performance

The Kenya Shilling appreciated against the US Dollar during the week, strengthening to Kshs 129.2/USD from Kshs 130.0/USD, representing an appreciation of 64.6 basis points. This marks a notable reversal from recent depreciation trends and reflects improved foreign exchange inflows and relative stability in the external environment.

On a year-to-date basis, the shilling has recorded a marginal depreciation of 7.7 basis points, compared to the appreciation of 22.9 basis points recorded in 2025, suggesting a relatively stable currency environment overall.

Forex Reserves

Kenya’s foreign exchange reserves declined by 2.5% during the week to USD 13.3 bn, down from USD 13.7 bn recorded the previous week. Despite this decline, reserve levels remain adequate, providing an import cover equivalent to 5.7 months, which is comfortably above the statutory minimum requirement of 4.0 months.

The current reserve position continues to offer a strong buffer against external shocks, supporting exchange rate stability and overall macroeconomic confidence.

Monetary Policy Developments (MPC – April 2026)

The Central Bank’s Monetary Policy Committee (MPC) maintained the Central Bank Rate (CBR) at 8.75%, in line with market expectations, following the rate cut from 9.00% in December 2025. The decision reflects confidence in the current monetary policy stance to anchor inflation and support economic stability.

Inflation remained well within the CBK’s target range of 2.5%–7.5%, coming in at 4.4% in March 2026, slightly higher than 4.3% in February. Core inflation remained low at 2.1%, supported by stable prices of key food items, while non-core inflation rose to 10.8%, driven by increases in vegetable prices.

The Kenyan economy continues to demonstrate resilience, with GDP growth estimated at 5.0% in 2025 and projected at 5.3% in 2026, albeit slightly lower than earlier projections due to emerging global risks, particularly geopolitical tensions in the Middle East.

The current account deficit widened to 2.4% of GDP, driven by higher imports and lower service receipts, and is projected to increase further to 3.0% in 2026. Meanwhile, the banking sector remains stable, with adequate capital buffers despite a slight increase in non-performing loans to 15.6%.

Private sector credit growth continued to improve, reaching 8.1% in March 2026, supported by declining lending rates, which averaged 14.7%, down from 17.2% in late 2024. The full implementation of the Risk-Based Credit Pricing Model (RBCPM) is expected to further enhance monetary policy transmission.

Economic Activity (PMI – March 2026)

Economic activity showed signs of moderation, with the Purchasing Managers’ Index (PMI) declining to 47.7 in March 2026, falling below the 50.0 expansion threshold for the first time in seven months. The decline was driven by weaker output and new orders, reflecting constrained consumer spending and reduced cash circulation.

Firms also reported cautious spending amid global uncertainties, particularly the impact of geopolitical tensions on fuel prices and logistics. As a result, businesses reduced inventories and slowed hiring, with employment growth easing to its weakest level since October 2025.

Overall Market Outlook

The fixed income market recorded a notable improvement in demand, particularly in the Treasury bills market, alongside stable yields and a slight tightening in liquidity conditions. The renewed preference for short-term instruments suggests a degree of caution among investors, likely influenced by evolving macroeconomic and global conditions.

At the same time, external indicators showed improvement, with declining Eurobond yields and a strengthening currency, pointing to enhanced investor confidence in Kenya’s macroeconomic stability.

However, underlying risks remain, particularly from global geopolitical developments, rising energy prices, and moderating economic activity as reflected in the PMI data.

Overall, the market reflects a balanced but cautious environment, with improving demand conditions tempered by external uncertainties, and investors likely to remain selective in their positioning in the near term.