CBK (Central Bank of Kenya) has gone into the primary bond market, where the fiscal agent seeks to raise KSh 60.0billion through sale of two reopened 20-year and 25-year Treasury Bonds.
These two debt instruments have a maturity of 13.20 and 21.8 years, as well as coupon rates of 12.87% and 14.19% respectively. The sale period for both papers run until 7th January 2026.
The total outstanding amount for the bonds stands at KSh 259.0 billion, with the longer tenured 25-year paper holding a slightly larger allocation of KSh 175.6billon.
Analysts at Standard Investment Bank(SIB) observe that given the steady decline in bond yields in response to Central Bank Rate(CBR) cuts and ample liquidity, increased investor demand is anticipated. This is especially so for the 25-year paper, first sold in 2022. This debt instrument has a comparatively attractive coupon rate, an attraction to foreign investors as well as local institutional fund managers.
Additionally, the CBK is concurrently offering a bond switch from a 10-year paper first sold in 2016 to the reopened 18-year-old debt instrument that was first sold in 2022. The fiscal agent is targeting up to KSh 20.0Billion or 19.3% of the outstanding amount, via a multi-price auction from 9th December 2025 to 19th January 2026.
CBK’s Switch Treasury Bonds Auction
This is CBK’s first switch auction in the 2025/26 fiscal year, which is part of 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, 10-year T-Bond had been earmarked for two liability management operations (October 2025 and January 2026). The offer is on a voluntary basis for investors with unencumbered holdings in this bond as at 19th January 2026.
Market Analysts expect this switch bond to provide investors in the fixed income market with an opportunity to extend the duration of their portfolios. This is especially so for fund managers who are keen on managing their cashflows, locking in the comparatively attractive 13.942% coupon rate on the 15-year T-Bond amid recent rate declines.
Furthermore, the switch may also help investors address potential reinvestment risk if yields in the market fall even further, should the paper be held till August 2026.
National Treasury aims to raise some KSh635Billion in domestic borrowing to support the 2025/26 budget. The strong demand for long term treasury bonds is seen as a signal of huge investor confidence in the Kenyan economy.
With the yield on government paper on a decline, the CBK maintains a ferocious appetite for cheap funds, to repay maturing debt as well as finance the 2025/26 budget.
CBK Treasury Bills Auction Update
During last week’s Treasury Bills Auction, there was an overwhelming response from investors, with overall performance at 135.7% against 220.2% the week prior.
Investors submitted bids to CBK totalling KSh 32.6 Billion, against KSh25 Billion that was offered, of which the fiscal agent accepted 97.2% of the bids.
This amount was slightly higher than the maturity amounts, resulting in a net borrowing of KSh 5.4Billion. In absolute terms, the 364-day paper received the largest bids, with the paper garnering 70.4% of total bids. The 91-day paper followed suit, recording an oversubscription rate of 187.7%, while the 182-day paper recorded a muted performance rate of 22.4%.
Overall, KSh 31.7Billion worth bids was accepted at this auction, with the weighted average rate of accepted bids or what CBK was willing to pay investors at 7.78%, 7.80% and 9.24% for the 91-day, 182-day, and 364-day papers, respectively.
Infrastructure Projects listed in the 2025/26 Budget
The Government’s huge infrastructure spending covers projects in energy, water, housing, transport and roads. Among the big ticket projects include the Mombasa-Nairobi Expressway, Nairobi Rapid Bus Transport project, as well as KSh 217.8 Billion allocated for maintenance and rehabilitation of the country’s roadwork.
The Government is using the Public Private Partnerships(PPP) model to finance these public projects, aiming to raise KSh 70Billion from private sector players.
ALSO READ:CBK Receives Bids Worth KSh53.1Billion at Auction, a 132.8% Oversubscription
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