Kenya Fixed Income Market Update – Week Ending 20th June 2025

T-Bills Auction: Market Cools Slightly but Remains Active

During the week, T-bills were oversubscribed for the seventh consecutive week, though at a lower rate than previous weeks. The overall subscription rate stood at 114.1%, down from 237.4% the week before.

• Investor demand for the 91-day paper dropped sharply, attracting a 93.6% subscription rate, significantly lower than last week’s 364.9%.
• The 182-day paper saw marginal improvement, with a 26.1% subscription rate.
• The 364-day paper remained in high demand, though its subscription rate fell to 210.4% from 397.9%.

The government accepted Kshs 24.0 bn out of Kshs 27.4 bn in bids, translating to an 87.7% acceptance rate.

T-Bill Yields Trend (Downward):

• 91-day: Decreased by 1.0 bps to 8.17%.
• 182-day: Fell by 1.9 bps to 8.48%.
• 364-day: Dropped by 1.1 bps to 9.74%.

Bond Market: Strong Demand in Long-Term Bonds

In the primary bond market, the Central Bank of Kenya reopened:

• FXD1/2020/015 (9.7 years to maturity, 12.8% coupon)
• SDB1/2011/030 (15.7 years to maturity, 12.0% coupon)

These bonds attracted strong demand with a 202.7% oversubscription rate, receiving Kshs 101.4 bn in bids against the Kshs 50.0 bn target. The government accepted Kshs 71.6 bn, marking a 70.7% acceptance rate.

Average yields:

• FXD1/2020/015: 13.5%
• SDB1/2011/030: 14.0%

These yields were higher than their last reopening levels and offer real returns of 9.7% and 10.2% respectively, net of inflation (currently at 3.8%).

Money Market Liquidity:

Liquidity slightly eased:

• Interbank rate: Declined by 0.4 bps to 9.7%.
• Interbank volumes: Dropped sharply by 74.4% to Kshs 4.5 bn.

Eurobonds: Market Jitters Drive Yields Up

Kenya’s Eurobond yields rose across the board amid heightened market concerns following local demonstrations:

• The most notable increase was on the 13-year Eurobond (2021), rising by 45.3 bps to 10.0%.

Currency Market: Shilling Stability Continues

The Kenyan Shilling depreciated slightly by 2.6 bps to Kshs 129.3/USD, though it remains largely stable year-to-date with a 2.5 bps appreciation.

Forex Reserves:

Forex reserves stood at USD 10.9 bn (4.8 months of import cover), comfortably above statutory and regional benchmarks.

Key Fiscal Update: Treasury Revenue & Spending Data

The Treasury’s data for May 2025 shows:

• Revenue collections reached Kshs 2,157.8 bn (83.6% of target).
• Tax revenue totaled Kshs 2,011.4 bn (83.8% of target).
• Financing at Kshs 1,363.4 bn (72.0% of target).
• Total spending reached Kshs 3,519.2 bn (78.6% of target).

This marks the 11th consecutive month of missing prorated revenue targets, largely driven by a tough business climate, higher taxes, and a sluggish economy—reflected in a weak PMI average of 49.2 for FY’2024/2025.

🔍 Key Takeaway:

Investors remain cautious but active, with government securities still in strong demand despite subdued business sentiment. The easing of inflation and continued stability of the shilling may offer a supportive backdrop for the fixed income market going forward.