Kenya’s bond market opens FY2025/26 with strong investor demand, raising over $514M in long-term bonds amid falling short-term yields.
Kenya’s domestic bond market opened the 2025/26 financial year with strong momentum as investors continued to favor long-term bonds over short-term Treasury bills.
In an auction conducted in early July 2025, the Central Bank of Kenya (CBK) raised KSh66.65 billion (approx. USD 514 million), surpassing its target of KSh50 billion. The auction drew total bids worth KSh76.91 billion, indicating robust market appetite.
The two reopened bonds on offer were:
The 25-year bond received the stronger interest with an 87.7% subscription rate, while the 20-year bond followed with 66.2%. Accepted yields were 13.9% for the 20-year and 14.4% for the 25-year note—levels attractive enough for pension funds and insurance firms seeking long-term returns.
This auction builds on an earlier successful reopening on June 23, in which CBK sold:
That event raised KSh71.64 billion from total bids of KSh101.36 billion, achieving a 202.7% subscription rate—more than double the initial target.
Drop in Treasury Bill Demand
While demand for long-term bonds is surging, interest in short-term Treasury bills is cooling. In the July 7 auction, CBK received KSh24.79 billion in bids but accepted only KSh21.77 billion. The 182-day T-bill was the only tenor that was oversubscribed.
A similar pattern occurred in the June 30 auction, where the 364-day T-bill saw high demand while the 91-day and 182-day bills lagged behind.
Yields on short-term paper remained largely flat:
Why Investors Prefer Long-Term Bonds
Analysts link the investor shift to improved liquidity, lower inflation expectations, and CBK’s accommodative monetary stance. The Central Bank Rate currently stands at 12.5%, with hints of further easing, encouraging a pivot to long-term instruments.
“Investors are locking in double-digit yields before the rates drop further. Long-term bonds are now more appealing than T-bills,” said a Nairobi-based portfolio manager.
Supporting Government Borrowing Targets
The upbeat bond sales support the National Treasury’s FY2025/26 plan to raise KSh635 billion in net domestic borrowing. Strong subscription in long-tenor bonds will be critical to help the government finance its budget deficit without putting upward pressure on interest rates.
