Kenya Fixed Income Market Update – 24th October 2025

Money Markets & T-Bills Primary Auction

The T-bills market remained buoyant for the third consecutive week, recording an overall subscription rate of 105.9%, though slightly below last week’s 114.7%. Investor appetite continued to favor short-term securities, particularly the 91-day paper, which received bids worth Kshs 13.0 billion against Kshs 4.0 billion offered—equivalent to a 325.0% subscription rate, up from 91.0% the previous week.

Demand for the 182-day paper rose to 70.3% from 25.5%, while that of the 364-day paper declined to 53.7% from 213.5%. The government accepted Kshs 25.3 billion of the Kshs 25.4 billion received, representing a 99.9% acceptance rate.

Yields maintained a downward trajectory, reflecting easing short-term borrowing costs:

• 91-day: declined by 3.0 bps to 7.83%,
• 182-day: declined by 4.4 bps to 7.87%,
• 364-day: eased by 1.8 bps to 9.35%.

Government Bond Buyback and New Issuance

The government announced its second domestic bond buyback of 2025, targeting Kshs 30.0 billion out of the Kshs 76.5 billion outstanding in FXD1/2023/003, a 14.2% coupon bond with 0.6 years to maturity. The offer, which runs from 23rd October to 17th November 2025, seeks to ease short-term redemption pressures. However, given the bond’s short residual tenor, the buyback may attract limited investor participation, as most holders are likely to hold to maturity unless the buyback price is meaningfully attractive.

Concurrently, the CBK reopened two long-term papers — FXD1/2012/020 (7.0 years to maturity, 12.0% coupon) and FXD1/2022/015 (11.4 years to maturity, 13.9% coupon) — targeting Kshs 40.0 billion. The auction period runs from 23rd October to 5th November 2025.
Our recommended bidding ranges are 12.50%–13.00% for FXD1/2012/020 and 14.20%–14.70% for FXD1/2022/015.

Liquidity

Liquidity conditions in the interbank market tightened marginally, with the average interbank rate edging up 0.3 bps to 9.3% from 9.2% the previous week. However, interbank volumes surged by 72.6% to Kshs 14.5 billion, reflecting heightened short-term funding activity amid tax remittances offset by government disbursements.

Eurobonds

Kenya’s Eurobond yields posted mixed movements, reflecting balanced investor sentiment amid global rate volatility.

• The 7-year 2024 issue declined by 10.8 bps to 7.9%, while
• The 12-year 2019 issue edged up by 3.0 bps to 8.3%.

The flattening of Kenya’s yield curve continues to suggest improving market confidence in the sovereign’s debt management strategy, especially following recent successful Eurobond transactions and fiscal consolidation efforts.

Kenya Shilling & Forex Reserves

The Kenya Shilling depreciated marginally by 0.3 bps, closing at Kshs 129.2 per USD. On a year-to-date basis, the shilling has appreciated by 5.1 bps, albeit moderating from the 17.6% appreciation recorded in 2024.

Forex reserves increased slightly by 0.1% to USD 12.08 billion, equivalent to 5.3 months of import cover, comfortably above both the CBK’s statutory requirement (4.0 months) and the EAC’s convergence benchmark (4.5 months).

Weekly Highlight – Exchequer Performance for September 2025

The National Treasury released fiscal data for the second month of FY’2025/26, highlighting ongoing revenue mobilization challenges amid improving macroeconomic conditions.

Key Highlights:

• Total revenue collection: Kshs 581.7 billion, representing 84.5% of the prorated target.
• Tax revenues: Kshs 553.7 billion, meeting 84.3% of prorated expectations.
• Total expenditure: Kshs 1.02 trillion, equivalent to 92.3% of prorated targets.
• Public debt service: Kshs 509.6 billion, amounting to 87.6% of total revenue collected, reflecting sustained fiscal pressure.

Domestic borrowing remained elevated at 155.1% of prorated targets, compensating for shortfalls in external inflows, which met only 13.1% of projections.

The fiscal deficit widened modestly, but improved business activity — reflected by a rise in the PMI to 51.9 (September 2025) from 49.4 in August — signals a gradual rebound in private sector momentum.

The outlook remains anchored on stable inflation, a resilient shilling, and the recent 25 bps rate cut (to 9.25%), which is expected to support credit expansion and revenue performance in subsequent quarters.

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