Kenya Fixed Income Market Update – Week Ending 23rd May 2025

Treasury Bills Auction: Sustained Demand Despite Cooling Momentum

Kenya’s domestic debt market continued to show strength, with Treasury bills oversubscribed for the third consecutive week, reflecting ongoing investor appetite for short-term government securities. However, total demand moderated slightly compared to the prior week.

• The overall subscription rate declined to 142.4%, down from 179.7% the previous week.
• The 91-day paper, though still in demand, recorded a notable drop in investor interest, attracting Kshs 4.5 billion in bids against the Kshs 4.0 billion on offer, a subscription rate of 113.2%, down from 202.2%.
• The 182-day paper experienced a recovery in interest, with subscriptions climbing to 113.9% from 53.6%.
• The 364-day paper, while still oversubscribed, saw reduced momentum with a subscription rate of 182.7%, down from 296.8%.

Out of the Kshs 34.2 billion in total bids received, the government accepted Kshs 29.9 billion, reflecting a healthy acceptance rate of 87.6%.

Yields: Slight Decline Across the Curve

Yields across Treasury bills recorded a mixed but relatively stable performance:

• The 91-day yield dropped the most, easing by 4.7 basis points to 8.30%.
• The 182-day yield slipped marginally by 0.8 basis points, settling at 8.57%.
• The 364-day yield remained virtually unchanged, nudging up by just 0.04 basis points to 10.00%.

These yield movements reflect the central bank’s continued success in managing short-term borrowing costs amid stable inflation and liquidity dynamics.

Liquidity Conditions: Slight Tightening, Lower Interbank Volumes

Liquidity in the interbank market tightened marginally:

• The average interbank rate rose slightly by 1.8 basis points, hovering around 9.9%.
• Meanwhile, interbank trading volumes dropped significantly by 32.6%, from Kshs 7.5 billion to Kshs 5.0 billion, signaling a cautious stance among market participants despite ongoing government payments.

Kenya Eurobonds: Mixed Sentiment on the External Front

Kenyan Eurobonds recorded mixed performance:

• The 30-year Eurobond (2018) saw the sharpest upward movement in yields, rising by 13.1 basis points to 11.0%—possibly reflecting global risk repricing or duration-based investor concerns.
• Conversely, the 7-year Eurobond (2019) experienced a yield decline of 13.1 basis points to 7.7%, hinting at selective investor confidence in medium-term maturities.

Currency & Reserves: Shilling Stable, Reserves Improve

• The Kenyan Shilling appreciated slightly against the US Dollar, moving by 3.4 basis points to settle at Kshs 129.3. It remains stable on a year-to-date basis.
• Forex reserves increased by 1.4% to USD 10.3 billion, equivalent to 4.6 months of import cover—comfortably above the statutory minimum of 4.0 months, reinforcing Kenya’s external position.

Summary Outlook

Despite a mild slowdown in subscription momentum and interbank liquidity, Kenya’s fixed income market remains resilient, buoyed by strong investor interest, stable yields, and firm macroeconomic fundamentals. The continued oversubscription of Treasury bills and improved forex reserve position reinforce the country’s ability to manage its short-term obligations while preserving investor confidence.