1. Treasury Bills – February 2026 Overview

Treasury bills were significantly oversubscribed during February 2026, with the average subscription rate rising to 267.2%, compared to 110.8% in January.

Demand shifted notably toward:

• 91-day paper (247.1% from 81.3%)
• 364-day paper (490.0% from 157.6%)

The 182-day paper saw weaker demand at 52.5%, down from 75.8% in January.

The strong demand for short and longer short-term tenors reflects investor preference for liquidity while still capturing relatively attractive yields before further rate compression.

Average yields declined across the curve:

• 91-day: 7.6% (↓ 10.6 bps)
• 182-day: 7.8% (↓ 2.1 bps)
• 364-day: 9.1% (↓ 13.4 bps)

The decline in yields was driven by excess liquidity and aggressive bidding behavior.

The government accepted Kshs 191.1 bn out of Kshs 256.5 bn in bids, translating to a 74.5% acceptance rate, lower than January’s 92.9%. This indicates a more measured borrowing approach despite strong demand.

Weekly T-Bill Performance (Week Ending 27th February)

T-bills remained oversubscribed for the fifth consecutive week at 243.9%.

• 91-day subscription: 308.5%
• 182-day: 7.9% (sharp drop from 113.6%)
• 364-day: 454.0%

Yields were mixed:

• 364-day declined to 8.8%
• 91-day remained stable at 7.6%
• 182-day edged up slightly to 7.8%

The sharp decline in 182-day demand suggests investor repositioning rather than reduced liquidity.

2. Domestic Borrowing Position – FY’2025/26

So far in FY’2025/26:

• Securities accepted: Kshs 1,816.7 bn
• Redemptions: Kshs 920.1 bn
• Net domestic borrowing surplus: Kshs 471.0 bn

The government remains significantly ahead of its domestic borrowing schedule, reflecting front-loaded issuance under favorable liquidity conditions.

3. Treasury Bonds – February 2026

Bond demand strengthened materially in February.

The reopened bonds FXD3/2019/015 and FXD1/2018/025 recorded strong demand, with a weighted average yield of 12.2% and 13.4%, respectively — both lower than prior reopening levels.

The government accepted Kshs 100.5 bn out of Kshs 213.7 bn in bids, reflecting disciplined issuance.

Investor appetite for long-dated paper remains strong, despite medium-term debt sustainability concerns.

4. Secondary Bond Market

Secondary market turnover rose to Kshs 381.8 bn in February, up 37.2% month-on-month and 52.7% year-on-year.

The yield curve returned to a normal upward slope, with longer tenors commanding higher yields. This reflects:

• Improved short-term macro confidence
• Continued long-term fiscal risk premium

The normalization of the curve is a constructive signal compared to the inversion concerns seen over the past two years.

5. Liquidity Conditions

Liquidity eased modestly in February.

• Average interbank rate: 8.9% (↓ 13 bps)
• Interbank volumes declined month-on-month

Weekly liquidity remained stable at 8.8%.

The easing is consistent with monetary policy transmission and government payment flows.

6. Eurobond Market

Eurobond yields recorded mixed performance during February.

The 13-year 2021 bond rose to 8.1%, while the 10-year 2018 bond declined to 5.9%.

Weekly movements were similarly mixed.

The repricing at the long end reflects persistent concerns around long-term debt sustainability, despite improved market access.

7. Kenya Shilling & Reserves

The shilling remained stable at approximately Kshs 129/USD throughout February.

Forex reserves increased to USD 12.5 bn, equivalent to 5.4 months of import cover.

The external position remains stable despite liability management operations.

8. Eurobond Buyback Results

The government partially executed its buyback of the 2028 and 2032 notes.

• 2028 notes: fully accepted
• 2032 notes: partial acceptance; USD 307.9 mn remains outstanding

The buyback was financed through a USD 2.3 bn new Eurobond issuance.

While the transaction smooths the maturity profile, Kenya’s debt-to-GDP ratio remains elevated at 68.8%.

Repeated buybacks improve short-term refinancing risk but do not materially reduce overall debt levels.

9. Inflation – February 2026

Headline inflation declined marginally to 4.3%, remaining within the CBK target range for the 32nd consecutive month.

Fuel and electricity prices declined during the month.

Inflation remains contained; however, recent monetary easing could exert gradual upward pressure later in the year.

Overall Assessment

February 2026 was characterized by:

• Strong T-bill and bond demand
• Declining yields
• Active secondary market trading
• Stable currency
• Contained inflation
• Continued liability management

The fixed income market remains well supported in the near term.

However, long-term sustainability depends on:

• Fiscal consolidation
• Revenue mobilization
• Debt management discipline

Near-term yield compression is likely to continue, although long-dated risk premia may persist.