Kenya’s efforts to manage its growing debt obligations have taken another step forward after the Central Bank of Kenya (CBK) invited investors to swap a Treasury bond maturing later this year for a longer-dated security.
The Ksh 10 billion switch auction is designed to reduce the amount of debt the government must repay in November by encouraging investors to extend the maturity of their investments to 2032. Instead of redeeming the bond in cash, investors who participate will roll over their money into another Treasury bond, giving the government more time to meet its obligations.
The exercise targets holders of Treasury bond FXD1/2021/005, which matures on November 9, 2026. Investors who accept the offer will exchange their holdings for FXD1/2012/020, a bond that will mature six years later on November 1, 2032.
The latest move reflects a broader debt management approach that Kenya has increasingly relied on over the past two years. Faced with large domestic debt maturities and rising financing needs, the National Treasury and CBK have opted to refinance part of the debt instead of paying it off immediately. Bond switches allow the government to spread repayments over a longer period while avoiding pressure on public finances.
For investors, the offer comes with a number of incentives. The destination bond pays a higher coupon rate of 12 per cent compared to the 11.277 per cent attached to the bond being exchanged. Interest earned on the longer-term bond will also attract a withholding tax of 10 per cent, lower than the 15 per cent charged on the source bond, potentially improving investors’ net returns.
The switch auction opened on June 26 and will remain open until July 13, while settlement has been scheduled for July 15.
CBK on allocations
CBK said allocations will be communicated through the DhowCSD Investor Portal once the auction closes.
“All successful bidders should obtain details of amounts allocated from the DhowCSD Investor Portal/App under the Bids tab on Monday, July 13, 2026,” the regulator said.
Participation is limited to investors holding unencumbered units of the maturing bond by July 13. Investors are free to switch either all or part of their holdings, provided they meet the eligibility requirements.
Retail investors submitting non-competitive bids can invest between Ksh50,000 and Ksh50 million, while competitive bids require a minimum investment of Ksh2 million per Central Securities Depository account.
The auction will be conducted using a multi-price format, meaning investors will quote the yields they are willing to accept instead of bidding at one fixed rate. The bond maturing this year is currently trading at a quoted yield of 8.8322 per cent.
Investors with outstanding pledges against the source bond have also been advised to cancel those pledges at least five days before settlement to qualify for the switch.
The announcement comes against the backdrop of sustained demand for government securities. Lower inflation, easing interest rates and the search for stable investment opportunities have continued to support investor appetite for Treasury bills and bonds.
Results released by CBK this week showed investors submitted bids worth Ksh28.06 billion for Treasury bills against an offer of Ksh24 billion, resulting in an oversubscription rate of 116.91 per cent. The 91-day Treasury bill attracted the strongest demand, a sign that investors continue to favour government paper despite declining yields.
Economists say successful bond switches help both the government and investors. The Treasury reduces refinancing risks and avoids large cash outflows when bonds mature, while investors remain invested without having to wait for redemption before purchasing another security. The arrangement also helps preserve liquidity in the domestic bond market by keeping investors active.
CBK added that successful bidders will have their portfolios updated through the DhowCSD platform before settlement on July 15. Any cash balance below the minimum investment threshold of Ksh50,000 will be refunded on the settlement date.
The regulator further noted that the destination bond qualifies for statutory liquidity ratio requirements for banks and non-bank financial institutions, making it an attractive asset for institutional investors. It also indicated that the bond could be reopened in future depending on the government’s financing requirements.
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