Kenya Fixed Income Market Weekly Update – 14th February 2025

The Kenyan fixed income market remained active this week, with Treasury bill (T-bill) subscriptions moderating and investors showing strong demand for infrastructure bonds.

📌 T-Bill Auction Summary

T-bills were oversubscribed for the second consecutive week, with an overall subscription rate of 184.4%, though lower than 296.6% recorded the previous week.

✅ 91-day T-bill: Undersubscribed at 63.2%, reversing last week’s 250.0% oversubscription.
✅ 182-day T-bill: Subscription slightly decreased to 236.2% (previously 240.0%).
✅ 364-day T-bill: Demand dropped to 181.1% (previously 371.8%).

Total bids received: Kshs 44.3 billion | Accepted bids: Kshs 25.1 billion | Acceptance rate: 56.8%

🔻 Declining Yields

Interest rates continued their downward trajectory across all tenors:

📉 91-day T-bill: 9.0% (-14.6 bps)
📉 182-day T-bill: 9.4% (-10.9 bps)
📉 364-day T-bill: 10.6% (-16.4 bps)

📌 Bond Market Activity

🏗️ Infrastructure Bond Auction Results

The Central Bank of Kenya (CBK) reopened IFB1/2022/014 and IFB1/2023/017, attracting overwhelming demand:

💰 Subscription rate: 277.0% (Bids worth Kshs 193.9 billion for Kshs 70.0 billion on offer).
💰 Accepted bids: Kshs 130.8 billion (Acceptance rate: 67.5%).
💰 Final weighted average yields:

• IFB1/2022/014 (11.8 years to maturity) – 14.0%
• IFB1/2023/017 (15.1 years to maturity) – 14.3%

💡 Key Observations

• The 14.0% yield on IFB1/2022/014 was slightly higher than 13.9% in the last auction (Nov 2022).
• The 14.3% yield on IFB1/2023/017 was lower than 17.7% in its last auction (Aug 2024).
• With inflation at 3.3%, the real return stands at 10.7% (IFB1/2022/014) and 11.0% (IFB1/2023/017).
• Being tax-free, the effective tax-equivalent yields stand at 15.5% and 15.9%, making them highly attractive to investors.

📌 Energy Prices Update – February 2025

EPRA maintained fuel prices for the period 15th February – 14th March 2025, keeping maximum pump prices unchanged:

⛽ Super Petrol: Kshs 176.6 per litre
⛽ Diesel: Kshs 167.1 per litre
⛽ Kerosene: Kshs 151.4 per litre

🔎 Market Outlook & Investment Takeaways

✅ Falling T-bill rates signal declining borrowing costs but could reduce short-term fixed income returns.
✅ Strong demand for infrastructure bonds reflects investor appetite for tax-free, long-term securities.
✅ Fuel price stability supports inflation control, positively impacting macroeconomic stability.

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