CBK (Central Bank of Kenya) Switch Auction received bids worth KSh2.56 Bn, against a target of KSh 20 Bn, an undersubscription of 12.8%.
This is as holders of the KSh 20 billion 10-year debt instrument gave the 5th switch auction since the 2025/26 fiscal year begun, a wide berth. CBK invited bidders to switch from the 10-year bond due in August 2026 to a 15-year one maturing on 9th May 2033.
CBK Received Bids worth KSh 2.56 Bn
CBK accepted bids worth KSh 1.75 billion, with an amount of KSh 1.76 billion switched from the 10-year to the 15-year T-Bond.
The 10-year paper is nearing the end of its life cycle, with only 0.3 years remaining to maturity. Holders of this instrument remained put with eyes on the higher coupon rate of 15.0390% compared to the 15- year instrument which carries a coupon rate of 12.65%.
The fifteen-year paper offered investors a significantly longer horizon, with 7.1 years remaining to maturity. It carried a coupon rate of 12.6500% and matures on May 9, 2033. The destination bond attracted an accrued interest of KSh 5.1782 per KSh 100.
In 2026, the CBK has undertaken two Switch Bond Auctions, with the January one targeting the same source bond drew KSh 26.49 Bn in bids and accepted KSh 25.17 billion against the KSh 20 Bn offer, a 132% performance. In December 2025/ January 2026 switch auction CBK was offering the option of switching from a 10 year treasury bond first sold in 2016 to a reopened 18 year treasury bond first sold in 2022, targeting up to KSh 20.0bn through a multi-price auction from 9th December 2025 to 19th January 2026.
This marked the first switch auction in the 2025/26 financial year as part of the Central Bank of Kenya as the state fiscal agent to tweak the Government’s liability management operations that seek to use buybacks and switches to actively manage maturity risk, reduce borrowing costs, and smooth the redemption profile of domestic debt.
In particular, the 10-year treasury bond first sold in 2016 had been earmarked for two liability management operations (October 2025 and January 2026).
Analysts at SIB expect that the switch auctions to provide investors the opportunity to extend the duration of their portfolios. This is especially so for institutional investors including fund managers who are keen on managing their cashflows), locking in the comparatively attractive coupon rates amid recent rate declines.
Furthermore, the switch by Central Bank of Kenya will also help fixed income investors address potential reinvestment risk if yields in the market fall even further, should the paper be held till August 2026.
In the March Switch Bond Auction, which converted a 5-year T-Bond into a 15-year T-Bond, attracted bids worth KSh 22.21Bn against KSh 15 Bn target with the CBK accepting KSh 18.4 Bn. CBK has been conducting switch bond auctions as a critical component of Kenya’s broader Medium-Term Debt Management Strategy (MTDS), which prioritizes reducing refinancing risks.
By lengthening the average time to maturity of the domestic debt portfolio, the CBK effectively defers significant repayment obligations. This strategy is designed to minimize the costs of debt and reduce the immediate debt burden, which the government aims to lower from 5.4% of GDP to 4.6% by 2028.
CBK Switch Auction
A switch auction is a debt management tool in which a government invites investors to exchange certain existing bonds for a different bond, typically to increase the liquidity or outstanding size of the target bond.
This process allows older or less liquid bonds to be replaced with those deemed more strategic, helping optimise the bond market structure and manage the maturity profile without issuing entirely new debt.
ALSO READ: Central Bank of Kenya Accepts KSh25.2 Bn in Bond Switch Auction
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