Investors poured billions of shillings into the government’s latest Treasury bond sale. Still, the Central Bank of Kenya (CBK) turned away a significant portion of the money after evaluating the bids, accepting Ksh 57.78 billion out of applications worth Ksh 74.67 billion.
The latest auction, whose settlement date is July 13, attracted more money than the government had planned to raise, with subscriptions reaching about 106.7 per cent of the Ksh 70 billion target. However, the CBK declined bids worth Ksh16.89 billion, mainly because they did not meet the pricing criteria set for the auction.
The sale involved reopening two existing Treasury bonds and issuing a new 30-year infrastructure-style bond, giving investors a choice between medium- and long-term investments.
Demand was spread across all three securities, although the 30-year bond emerged as the most popular among investors seeking to lock in returns over a longer period. Such appetite reflects growing interest from pension funds, insurers and other institutional investors that typically prefer long-dated government securities because they match their long-term financial obligations.
Auction results published by the CBK show the 10-year FXD1/2022/010 bond received bids worth Ksh 28.86 billion. The regulator accepted Ksh 8.53 billion, with successful investors securing a weighted average yield of 12.9524 per cent. The bond carries a fixed annual coupon of 13.49 per cent.
The 20-year FXD1/2021/020 bond also attracted healthy participation. Investors submitted bids worth Ksh19.65 billion, while the CBK accepted Ksh13.56 billion. The successful bids recorded a weighted average yield of 14.5379 per cent. The bond pays a coupon of 13.44 per cent.
The biggest attraction during the auction was the newly introduced 30-year FXD1/2026/030 bond. Investors submitted applications worth Ksh 26.16 billion. After factoring in non-competitive bids, the CBK allocated Ksh 35.69 billion under the issue, making it the largest allocation among the three bonds. The weighted average accepted yield stood at 14.5962 per cent, while the coupon rate was set at 12.50 per cent.
In its auction report, the CBK said the 10-year bond “attracted bids worth Ksh28.86 billion, of which Ksh 8.53 billion was accepted,” while the 20-year and 30-year securities also recorded strong participation from investors.
Domestic debt
The outcome comes at a time when the government continues to depend heavily on the domestic debt market to finance its budget while reducing pressure to borrow externally. Kenya has increasingly relied on Treasury bills and bonds to meet funding requirements, refinance maturing debt and cushion the budget from revenue shortfalls.
Treasury bonds have remained attractive this year because they provide guaranteed interest payments backed by the government. Unlike Treasury bills, which mature within one year, Treasury bonds allow investors to earn fixed interest over several years, making them especially appealing to retirement schemes, insurance companies, banks and long-term individual investors.
The latest yields also suggest investors continue to demand relatively high returns before committing their money for long periods. Longer-term bonds typically offer higher yields because investors face greater risks associated with inflation, economic changes and interest rate movements over time.
Market analysts say reopening existing bonds instead of introducing entirely new securities also benefits the government by increasing the amount available in the market for already established bonds. Larger bond sizes improve trading activity in the secondary market and make it easier for investors to buy or sell the securities before maturity.
Money raised through Treasury bond auctions is used to finance development projects, including roads, schools, hospitals and energy infrastructure, while also supporting government operations and refinancing existing debt. By borrowing through the local market, the government spreads repayment obligations over many years instead of relying on short-term financing.
The CBK has also announced that details of the next Treasury bond sale will be released before the August 2026 auction. The prospectuses will outline the bonds on offer, their maturities, coupon rates and the terms that investors will use when submitting bids.
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