Kenya Weekly Fixed Income & Macro Market Update | 17th April 2026

Money Market & Treasury Bills Auction

The Treasury bills market softened during the week, with overall subscription declining to 58.3%, marking a return to undersubscription after two consecutive weeks of improved demand. This represents a notable drop from the 102.3% recorded in the previous week, reflecting a moderation in investor appetite for short-term government securities.

Investor demand weakened across all tenors, with the most pronounced decline observed in the short end of the curve. The 91-day paper recorded a subscription rate of 64.4%, down sharply from 199.4% in the previous week, indicating a reversal in the strong preference for short-term instruments seen earlier. Similarly, demand for the 182-day paper declined to 76.7% from 108.5%, while the 364-day paper recorded the weakest uptake at 37.5%, down from 57.2%, suggesting reduced appetite for longer-duration exposure.

Despite the subdued demand, the government maintained a high acceptance rate of 99.8%, accepting Kshs 13.97 bn out of Kshs 14.0 bn bids received, reflecting continued borrowing requirements and the absorption of available liquidity.

Yields edged upward across all tenors, although the movements remained marginal. The 91-day yield increased by 2.4 basis points, while the 364-day and 182-day yields rose by 0.2 and 0.02 basis points, respectively, to remain broadly stable at 7.4%, 8.3%, and 7.8%. The slight uptick in yields, coupled with lower subscription levels, suggests mild pressure on demand, albeit within a largely stable interest rate environment.

Treasury Bonds Market

Activity in the Treasury bonds market presented a mixed picture, with divergent outcomes observed across auctions.

The bond switch auction from FXD1/2016/010 into FXD1/2018/015 recorded weak investor participation, with a subscription rate of 12.8%, as bids totaled Kshs 2.6 bn against an offer of Kshs 20.0 bn. The government accepted Kshs 1.8 bn, translating to an acceptance rate of 68.5%, with a weighted average yield of 12.0%. With inflation at 4.4%, the bond offered a real return of approximately 7.6%, indicating relatively attractive real yields despite the subdued demand. The weak uptake suggests investor hesitation toward the switch structure or preference for alternative instruments.

In contrast, the re-opened SDB1/2011/030 and the new FXD1/2026/030 bonds recorded strong demand, with a combined subscription rate of 191.7%, as bids reached Kshs 38.3 bn against an offer of Kshs 20.0 bn. The government accepted Kshs 30.1 bn, reflecting an acceptance rate of 78.4%.

The weighted average yields came in at 13.0% for SDB1/2011/030 and 13.8% for FXD1/2026/030, translating to real returns of approximately 8.6% and 9.4%, respectively. Notably, the yield on the reopened bond declined from 13.3% recorded in December 2025, indicating improved investor confidence and demand for long-term government securities.

Overall, the bond market reflects strong appetite for long-duration instruments, even as participation in switch auctions remains relatively weak.

Liquidity & Interbank Market

Liquidity conditions in the money market tightened slightly during the week, largely due to tax remittances that offset government spending. The average interbank rate increased marginally to 8.8%, remaining broadly stable compared to the previous week.

Interbank activity declined, with average volumes traded falling by 20.2% to Kshs 11.2 bn, down from Kshs 14.0 bn recorded previously. The decline in volumes alongside stable rates suggests a relatively balanced liquidity environment, with reduced reliance on interbank borrowing despite tighter conditions.

Kenya Eurobond Market

Kenya’s Eurobond yields continued on a downward trajectory, reflecting improving investor sentiment in the external debt market. The yield on the 7-year Eurobond issued in 2024 declined by 35.0 basis points to 8.1%, indicating increased demand for Kenya’s sovereign debt in international markets.

This trend suggests a reduction in perceived risk and improved confidence in Kenya’s macroeconomic outlook, despite ongoing global uncertainties.

Currency Performance

The Kenya Shilling appreciated marginally against the US Dollar during the week, strengthening to Kshs 129.1/USD from Kshs 129.2/USD, representing an appreciation of 3.1 basis points. The relatively stable movement highlights continued exchange rate stability.

On a year-to-date basis, the shilling has recorded a marginal depreciation of 4.6 basis points, compared to the appreciation recorded in 2025, suggesting a broadly stable currency environment.

Forex Reserves

Kenya’s foreign exchange reserves remained largely unchanged at USD 13.3 bn, equivalent to approximately 5.6 months of import cover, which remains comfortably above the statutory requirement of 4.0 months.

The stable reserve position continues to provide a strong buffer against external shocks, supporting investor confidence and exchange rate stability.

Macroeconomic Developments

Fuel Prices Adjustment

Fuel prices recorded a significant adjustment during the period, reflecting sharp increases in global oil prices driven by geopolitical tensions. Initially, prices for Super Petrol and Diesel rose sharply before being partially revised downward, reflecting government intervention measures, including adjustments to VAT and price stabilization mechanisms.

The increase in landing costs—particularly for Kerosene, Diesel, and Super Petrol—highlights rising import costs, which may exert upward pressure on inflation and household spending in the near term.

Fiscal Performance (Exchequer – March 2026)

Fiscal data for the ninth month of FY’2025/2026 indicates a mixed performance. Total revenue collections stood at Kshs 1,833.3 bn, equivalent to 65.8% of the revised annual target and 87.8% of prorated estimates, reflecting a shortfall in revenue performance.

At the same time, total expenditure exceeded prorated targets, coming in at 108.5%, indicating continued pressure on fiscal balances. Notably, debt servicing costs amounted to Kshs 1,364.7 bn, equivalent to 74.4% of total revenues, underscoring the significant burden of public debt obligations.

While external financing remained relatively strong, domestic borrowing fell below target, suggesting some easing in reliance on local markets. However, the broader fiscal environment continues to reflect structural pressures, including revenue underperformance and high debt servicing costs.

Overall Market Outlook

The fixed income market during the week reflected mixed dynamics, with weaker demand in the Treasury bills market, strong appetite for long-term bonds, and stable but slightly tighter liquidity conditions.

The divergence between T-bill and bond demand suggests a repositioning by investors toward longer-duration instruments, likely driven by attractive real returns and expectations of stable interest rates. At the same time, improved performance in the Eurobond market and currency stability point to growing investor confidence in Kenya’s macroeconomic outlook.

However, underlying risks remain, particularly from rising global oil prices, fiscal pressures, and evolving global uncertainties. As such, the market environment remains balanced but cautious, with investors likely to remain selective in their allocation decisions in the near term.

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