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Kenya Fixed Income Market Highlights – Week Ending January 17, 2025
📉 T-Bill Performance: A Declining Trend
This week, Treasury bills underperformed, registering an undersubscription rate of 76.8%, a notable drop from the 138.1% oversubscription recorded the previous week.
🔹 Breakdown by T-Bill Tenor:
- 91-day T-bill: Demand fell sharply, with investors bidding Ksh 3.4B against Ksh 4.0B offered (84.6% subscription)—a huge decline from 333.1% oversubscription last week.
- 182-day T-bill: Subscription dropped to 54.5% from 97.1% last week.
- 364-day T-bill: Slight decrease to 100.3%, down from 101.1% in the previous auction.
- Total Government Acceptance: Ksh 18.1B accepted out of Ksh 18.9B received (96.1% acceptance rate).
💰 T-Bill Yields
The yields on short-term government securities showed mixed performance this week:
| T-Bill Tenor | Yield (%) | Weekly Change |
|---|---|---|
| 91-day | 9.56% | 📉 -0.03% |
| 182-day | 10.03% | 🔹 Unchanged |
| 364-day | 11.30% | 📉 -0.03% |
📈 Bond Auction Results: Strong Demand for Long-Term Bonds
The Central Bank of Kenya (CBK) reopened two government bonds:
1️⃣ FXD1/2018/015 (8.3 years to maturity) – 12.7% fixed coupon rate
2️⃣ FXD1/2022/025 (22.7 years to maturity) – 14.2% fixed coupon rate
📊 Auction Performance:
- Total Bids Received: Ksh 59B vs. Ksh 30B offered (oversubscription rate of 196.7%).
- Total Accepted Bids: Ksh 48.5B (Acceptance rate: 82.2%).
🔹 Yield Insights:
| Bond | Accepted Yield (%) | Previous Yield (%) |
|---|---|---|
| FXD1/2018/015 | 14.2% | 12.7% (July 2021) |
| FXD1/2022/025 | 15.7% | 14.2% (October 2022) |
💡 Real Returns: With inflation at 3.0%, the real return for investors stands at:
- FXD1/2018/015: 11.2%
- FXD1/2022/025: 12.7%
✅ Tax Advantage: These bonds are taxed at 10%, lower than the 15% tax rate on short-term bonds—making them an attractive long-term investment.
⛽ Fuel Prices Update (Jan 15 – Feb 14, 2025)
The Energy and Petroleum Regulatory Authority (EPRA) announced new fuel price adjustments:
- Super Petrol: Ksh 176.6 (+0.2%)
- Diesel: Ksh 167.1 (+1.2%)
- Kerosene: Ksh 151.4 (+2.0%)
⛽ These price changes could influence transport costs, inflation trends, and overall economic activity.
💡 Investment Takeaways
- T-Bill subscription rates saw a notable drop, indicating possible liquidity tightening in the market.
- Bond demand remains strong, with higher yields on long-term infrastructure bonds attracting investors.
- Fuel price hikes could impact inflation and household spending in the coming weeks.
📢 Stay Informed!
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📌 Source: Central Bank of Kenya (CBK), EPRA