Central Bank of Kenya(CBK)is offering a Treasury Bonds Auction switch 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.
The Central Bank of Kenya is also seeking KSh 60 billion through two 20 year and 25 years reopened treasury bonds, the first auction this year. This is Central Bank of Kenya shifts its debt management strategy to bonds that have a longer maturity period, ostensibly to reduce pressure on debt repayment obligations.
According to the Central Bank of Kenya prospectus, these two treasury bonds have a return of 12.87% and 14.19% for the 20-year bond and 25-year bond respectively. The sale period for both papers running until 7th January 2026.
A bulletin from Standard Investment Bank(SIB) shows that the total outstanding amount for the treasury bonds stands at KSh 259.0billion, with the longer tenured 25-year instrument holding a slightly larger allocation of KSh175.6bn.
Given the steady decline in bond yields in response to Central Bank Rate cuts, ample liquidity, and recent auction trends, analysts anticipate increased investor demand for the 25-year paper, due to its attractive coupon rate.
Central Bank of Kenya is Conducting First Switch Bond Auction in 2025/26 Financial Year
This marks the first switch auction in the 2025/26 financial year is 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).
The offer is on a voluntary basis for investors still holding this instrument as at 19th January 2026.
Analysts at SIB expect that the switch auction will 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 13.942% coupon rate on the 15-year paper 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.
As of this week, the Government’s outstanding maturities to January 2027 are at KSh 1,009.13Billion in Treasury Bills and KSh 345.76 Billion in Treasury Bonds.
The next bond maturity is expected in May 2026, amounting to KSh 86.8billion, affording the government much-needed breathing space on its repayment schedule.
Kenya Shilling Exchange Rate Performance Update
Meanwhile, the Kenyan Shilling exhibited mixed performance last week compared to other regional and major currencies. In particular, the Kenyan Shilling gained ground against the Ugandan Shilling, British Pound, Euro, Tanzanian Shilling, and Japanese Yen.
On the other hand, the local unit remained largely unchanged against the dollar. In particular, the U.S. Dollar Index is estimated to have strengthened by 0.39% during the week ending December 31, 2025, mainly reflecting low-end-year trading.
In December 2025, monthly inflation held steady, coming in at 4.5%, with core inflation dwindling to 2.0% from 2.3% in November 2025.
December monthly inflation rate holds steady
The overall price increase in December was largely on the back of higher prices in the Food and Non-Alcoholic Beverages (7.8%); Transport (5.2%), and Housing, Water, Electricity, Gas, and other fuels (1.6%) segments.
On a month-on-month basis, consumer prices rose by 0.6%, up from 0.2% recorded in November 2025, reflecting relative stability across key indices. However, upward pressure persists, driven by rising food prices on select items, further squeezed by higher transport prices.
Overall, core inflation points to continued price stability, which is partly attributed to slow consumer spending. A stable Kenya Shilling Exchange Rate against the Greenback is also seen as cooling down imported cost-push inflation pressures in the economy.
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