Kenya Weekly Fixed Income Market Update | 27th March 2026

Money Market & Treasury Bills Auction

The Treasury bills primary market recorded a notable slowdown during the week, with overall subscription declining sharply to 45.5%, marking the first instance of undersubscription in eight weeks. This represents a significant drop from the 146.9% recorded in the previous week and points to a temporary easing in investor demand for short-term government securities.

Investor appetite weakened across all tenors, with the most pronounced decline observed in the 91-day paper, which has traditionally attracted strong demand. Bids for the 91-day paper came in at Kshs 2.6 bn against an offer of Kshs 4.0 bn, translating to a subscription rate of 64.9%, down from 361.3% the previous week. Similarly, demand for the 182-day and 364-day papers declined to 28.3% and 54.9%, respectively, from 103.0% and 105.1% recorded the week prior.

Despite the subdued demand, the government maintained a high acceptance rate of 99.4%, accepting Kshs 10.86 bn out of Kshs 10.92 bn bids received, signaling continued borrowing needs and a willingness to absorb available liquidity.

Yields across all tenors continued on a downward trajectory, indicating easing pressure in the short-term interest rate environment. The 91-day yield declined the most, falling by 14.2 basis points to 7.4%, while the 364-day yield decreased by 6.3 basis points to 8.3%. The 182-day yield remained relatively stable, edging down slightly by 1.1 basis points to 7.8%. The simultaneous decline in yields and subscription levels suggests a combination of reduced liquidity appetite and possible investor repositioning toward alternative instruments.

Primary Bond Market

In the primary bond market, the government is currently conducting a switch auction aimed at raising Kshs 20.0 bn, offering investors an opportunity to exchange holdings from a near-maturity bond into a longer-dated instrument. Specifically, investors can switch from FXD1/2016/010, which carries a coupon of 15.0% and has approximately 0.3 years to maturity, into FXD1/2018/015, which offers a 12.7% coupon and a remaining tenor of about 7.1 years.

The switch auction, which opened on 23rd March 2026 and will close on 13th April 2026, is part of the government’s broader strategy to lengthen its debt maturity profile and manage refinancing risks. From an investor perspective, the offer presents an opportunity to lock in medium- to long-term yields in a relatively stable interest rate environment.

Our recommended bidding range for the switch stands at 12.25% – 12.55%, reflecting a balanced view of prevailing market conditions and expected yield movements.

Liquidity & Interbank Market

Liquidity conditions in the money market tightened slightly during the week, largely driven by tax remittances that absorbed liquidity and offset government spending. As a result, the average interbank rate edged up marginally by 3.1 basis points to 8.7%, although it remained broadly stable compared to the previous week.

At the same time, activity in the interbank market increased, with average volumes traded rising by 20.0% to Kshs 14.3 bn from Kshs 12.0 bn recorded previously. This increase in volumes, despite tighter liquidity, suggests that banks remained active in managing short-term funding requirements, pointing to a well-functioning interbank market.

Kenya Eurobond Market

The Eurobond market recorded mixed performance during the week, reflecting differentiated investor sentiment across maturities. The yield on the 10-year Eurobond issued in 2018 rose significantly by 63.0 basis points to 7.3%, indicating increased selling pressure or shifting risk perceptions in the shorter end of the external debt curve.

In contrast, the 30-year Eurobond issued in 2021 experienced a slight decline in yields, falling by 17.0 basis points to 9.4%, suggesting some level of demand for longer-duration securities. This divergence highlights ongoing adjustments by investors in response to both domestic and global macroeconomic conditions.

Currency Performance

The Kenya Shilling depreciated modestly against the US Dollar during the week, weakening to Kshs 129.8/USD from Kshs 129.5/USD, representing a depreciation of 17.8 basis points. While the movement remains relatively contained, it reflects continued external pressures, including demand for foreign currency and broader global dollar strength.

On a year-to-date basis, the shilling has depreciated by 54.2 basis points, marking a reversal from the appreciation trend observed in 2025, when the currency had strengthened by 22.9 basis points. The current trajectory suggests a more balanced but slightly pressured currency environment.

Forex Reserves

Kenya’s foreign exchange reserves declined by 1.9% during the week to USD 14.0 bn, down from USD 14.3 bn recorded the previous week. Despite this decline, reserve levels remain robust, providing an import cover equivalent to approximately 6.0 months, which is well above the statutory minimum requirement of 4.0 months.

This strong reserve position continues to play a critical role in supporting currency stability and maintaining investor confidence in the country’s external position.

Overall Market Outlook

Overall, the week was characterized by softer demand in the Treasury bills market, declining yields across short-term instruments, and slightly tighter liquidity conditions. At the same time, external indicators presented mixed signals, with Eurobond yields diverging across maturities and the shilling recording a modest depreciation.

Looking ahead, investor attention is expected to focus on the ongoing bond switch auction, liquidity trends following the tax remittance cycle, and developments in the foreign exchange market. The current environment suggests a transitional phase, with investors carefully balancing short-term liquidity considerations against opportunities to lock in longer-term yields.