The Central Bank of Kenya has invited bids for the re-opening of two benchmark fixed coupon Treasury Bonds, targeting KSh 50 billion to support government budgetary spending in the second half of FY2025/26.
The auction covers the 15-year bond FXD3/2019/015 and the 20-year bond FXD1/2021/020. Both are reissues of existing securities, meaning investors are buying into bonds with shorter remaining tenors than at original issue, but with the same coupon rate, payment schedule, and maturity dates. The offer opened this week, with bids due by 10:00 am on auction day and settlement set for five business days later.
Why CBK is reopening, not issuing new bonds
Reopening existing bonds is CBK’s preferred tool for extending debt maturity without fragmenting the market with too many new benchmarks. It keeps liquidity concentrated in a few large issues, making them easier to trade on the Nairobi Securities Exchange.
The strategy also helps manage refinancing risk. By pushing investors into longer-dated paper, Treasury reduces the wall of maturities due in the next 2-3 years. Since July 2025, CBK has conducted 15 bond auctions, raising KSh 626.42 billion net of redemptions. Demand has skewed heavily toward 15- and 20-year paper as investors lock in double-digit yields before short-term rates fall further.
The government revised its net domestic borrowing target upward to KSh 885.9 billion in March 2026, up from KSh 635.5 billion, after a KSh 115.3 billion revenue shortfall and a KSh 262.9 billion increase in planned expenditure. The KSh 50 billion reopening is part of that revised program.
The bonds on offer
FXD3/2019/015 – 15-year bond
Originally issued in 2019, this bond now has roughly 9-10 years remaining to maturity. At issue it carried a coupon around 12.75%. In the secondary market it has traded at yields between 12.5% and 13.2% over the last three months. The semi-annual interest payments make it attractive to pension funds and insurers matching long-dated liabilities.
FXD1/2021/020 – 20-year bond
Issued in 2021 with a 13.924% coupon, this paper now has about 15-16 years to run. It has been the most sought-after tenor in 2026, with the May auction seeing bids worth KSh 40.5 billion against a KSh 30 billion target. CBK accepted KSh 31.97 billion at an average yield of 13.69%, below the coupon, pricing the bond at 101.81 per KSh 100.
Both bonds pay interest every six months and are subject to 10% withholding tax on interest income. They are listed on the NSE and can be traded in multiples of KSh 50,000 after settlement.
CBK allows two bid types:
Non-competitive bids: For retail investors. You specify the amount, not the yield. CBK assigns you the weighted average yield of successful competitive bids. Minimum KSh 50,000, maximum KSh 50 million per CSD account per tenor.
Competitive bids: For institutions and high-net-worth investors. You quote the yield you want. If it’s below the cut-off yield, your bid is accepted in full or pro-rated.
What’s driving demand
Three factors explain why investors keep bidding aggressively on long bonds:
Falling short-term rates : CBK has cut the Central Bank Rate in nine consecutive meetings since August 2024. The 91-day T-bill yield dropped from 16.8% in July 2024 to 8.14% by April 2026. With short-term paper offering sub-10% returns, pension funds and insurers are moving out the curve to lock in 13%+ yields.
Stable currency and inflation : Inflation averaged 4.1% in Q1 2026, and the shilling has been relatively stable against the dollar since Q4 2025. That gives investors confidence that real returns on 13-14% bonds won’t be eroded by currency or price volatility.
Liquidity in secondary market : Because these are benchmark issues, they trade actively. An investor who buys at auction can exit before maturity if they need cash, unlike infrastructure bonds that sometimes trade thinly.
Risks to watch
High yields reflect risk. Kenya’s public debt stood at 67.5% of GDP as of March 2026, and interest payments consume over 25% of ordinary revenue. Economist Daniel Kathali told Tuko that continued borrowing at these rates is sustainable only if revenue growth accelerates and fiscal consolidation holds.
There’s also duration risk. If interest rates rise again, the market value of 15- and 20-year bonds falls sharply. Investors holding to maturity don’t face this risk, but those planning to trade out need to watch the rate cycle.
What the auction means for fiscal policy
For Treasury, a successful auction does three things: raises cash for budget support, pushes out maturities, and tests investor appetite before the next supplementary budget. A weak auction would force CBK to raise yields, increasing debt service costs, or lean more on short-term T-bills, which are due within a year.
The outcome will also signal whether the market believes Kenya’s fiscal trajectory is credible. Strong uptake at yields below the coupon, as seen in May, suggests confidence. Weak uptake would raise questions.
Results are expected within 24 hours of the auction close. If demand exceeds the KSh 50 billion target, CBK can accept more at its discretion, as it did in May when it took KSh 94 billion against an KSh 80 billion target.
