Kenya Fixed Income Market Update – 16th May 2025

T-Bills Auction: Investor Demand Remains Resilient Amidst Shifting Preferences

During the week, T-bills were oversubscribed for the second consecutive time, reflecting continued strong investor appetite for government securities. The overall subscription rate stood at 179.7%, albeit lower than the 219.5% recorded the previous week.

• The 91-day paper remained the most attractive, receiving bids worth Kshs 8.1 billion against the Kshs 4.0 billion on offer, translating to a 202.2% subscription rate.
• The 364-day paper witnessed a sharp rise in demand with a subscription rate of 296.8%, up from 215.0% in the prior week.
• Conversely, interest in the 182-day paper waned, with subscription falling to 53.6% from 208.3%.

Out of the Kshs 43.1 billion in total bids received across all maturities, the government accepted Kshs 37.4 billion, yielding an acceptance rate of 86.8%.

T-Bill Yields: Modest Decline Continues

Yields on all three tenors edged lower, reinforcing the downward trend seen in recent weeks:

• 91-day: ↓ 1.2 bps to 8.37%
• 182-day: ↓ 1.8 bps to 8.58%
• 364-day: ↓ 0.8 bps to 10.00%

This decline may signal easing inflation expectations or reduced pressure on short-term government borrowing.

Money Market Liquidity: Slight Easing Amid Lower Volumes

Liquidity conditions in the interbank market remained broadly stable, with a slight easing:

• Interbank rate: ↓ 5.8 bps to remain near 9.9%
• Average interbank volumes traded: ↓ 23.6% to Kshs 7.5 billion, down from Kshs 9.8 billion

The decline in volumes suggests a temporary slowdown in short-term interbank lending, partly attributable to tax remittances being offset by government payments.

Eurobond Market: Improved Sentiment, Falling Yields

Kenya’s Eurobond yields declined across the curve, continuing a downward trajectory likely driven by easing global risk sentiment and investor repositioning:

• The 10-year Eurobond (2018 issue) recorded the largest drop, falling by 63.3 bps to 9.2% from 9.8% the previous week.

This suggests rising investor confidence in Kenya’s medium-term debt sustainability, especially amid renewed fiscal consolidation efforts.

Currency Watch: Shilling Holds Steady

The Kenyan Shilling depreciated marginally against the US Dollar by 2.4 bps, closing the week at Kshs 129.3. However, it remains broadly stable on a year-to-date basis, having appreciated by 0.6 bps in 2025, a reversal from the 17.4% appreciation recorded in 2024.

Forex Reserves: Slight Decline, Still Robust

Kenya’s forex reserves fell by 1.2% to USD 10.2 billion from USD 10.3 billion in the prior week. The reserves now represent 4.5 months of import cover, comfortably above the statutory threshold of 4.0 months, and continue to support exchange rate stability and external resilience.

Energy Price Watch: EPRA Holds Prices Steady

The Energy and Petroleum Regulatory Authority (EPRA) maintained fuel prices unchanged in its latest monthly review, applicable from 15th May to 14th June 2025:

• Super Petrol: Kshs 174.60/litre
• Diesel: Kshs 164.90/litre
• Kerosene: Kshs 150.00/litre

The stability in fuel prices offers temporary relief to consumers and may help contain inflationary pressures in the near term.

Key Takeaways

• T-Bills continue to attract strong investor demand, especially for the 91-day and 364-day papers.
• Yields on government securities remain on a modest downward trend.
• Kenya’s macroeconomic fundamentals — including forex reserves and currency stability — remain robust.
• Fuel price stability is expected to support a stable inflation environment in the short term.