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Kenya Fixed Income Weekly Update – 6th June 2025
1. T-Bill Auction: Strong Demand Continues Amid Shifting Investor Preferences
The T-bill market remained vibrant for the fifth consecutive week, with an overall subscription rate of 255.9%, rising from 229.6% recorded the previous week. Despite the strong demand, investors are showing greater interest in medium- and long-term tenors, a shift from the previous strong bias toward shorter papers:
| T-Bill Tenor | Subscription Rate | Yield (%) | W-o-W Yield Change |
|---|---|---|---|
| 91-day | 197.9% | 8.28 | ↓ 1.1 bps |
| 182-day | 104.9% | 8.54 | ↓ 2.1 bps |
| 364-day | 430.0% | 10.00 | ↓ 0.2 bps |
The government accepted Kshs 57.4 bn out of Kshs 61.4 bn in total bids, reflecting a strong acceptance rate of 93.5% as it takes advantage of the current oversubscription to lock in affordable funding.
2. Liquidity and Interbank Market
Liquidity conditions slightly tightened, with the average interbank rate remaining steady at 9.8%, inching up by 0.1 bps. This was partly due to tax remittances offsetting government payments.
| Metric | Week Ending 6th June | Week Ending 30th May | % Change |
|---|---|---|---|
| Average Interbank Rate | 9.8% | 9.8% | ↑ 0.1 bps |
| Interbank Volume (Kshs) | 7.9 bn | 6.5 bn | ↑ 22.2% |
3. Eurobond Performance: Renewed Optimism
Kenya’s Eurobonds continued on a downward yield trajectory, signaling improving investor sentiment. The 7-year Eurobond issued in 2024 led the gains, with the yield dropping 47.8 bps to 9.4% from 9.9% the previous week. The rally suggests a sustained global appetite for Kenyan sovereign debt as external risks ease and macro stability holds.
4. Currency Market: Shilling Maintains Momentum
The Kenya Shilling appreciated marginally against the USD by 1.4 bps, closing at Kshs 129.2, maintaining its relative strength. Year-to-date, the Shilling has gained 6.4 bps, a slower pace compared to the 17.4% appreciation in 2024, but still indicative of improved FX stability.
Additionally, forex reserves rose by 1.2% to USD 10.6 bn, equivalent to 4.7 months of import cover, remaining comfortably above the statutory threshold of 4.0 months.
5. Weekly Highlight – Stanbic PMI Turns Negative for First Time in 8 Months
Stanbic Bank’s Purchasing Managers’ Index (PMI) for May 2025 declined to 49.6, below the neutral 50.0 mark for the first time in eight months, down from 52.0 in April. This indicates a slowdown in private sector activity, driven by lower output and new orders. The reading signals potential headwinds in the real economy, despite stability in financial markets.
Conclusion:
Despite signs of caution in the real economy, Kenya’s fixed income market remains strong. Sustained investor appetite, easing Eurobond yields, and FX stability suggest resilience—though emerging indicators like the PMI warrant close monitoring in the weeks ahead.
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