Central Bank of Kenya (CBK) accepted KSh 94.04 billion from its May bond reopening auction, marking the first triple-tranche sale since April 2025. However, hefty maturities amounting to KSh 57.13 billion trimmed net additional borrowing to KSh 36.91 billion, making it the second-largest redemption-adjusted auction of the fiscal year after August’s KSh 94.6 billion offset.
The auction, which was the 15th conducted since July 2025, attracted bids worth KSh 106.02 billion against a target of KSh 80 billion. This translated to a subscription rate of 132.52% and a bid-to-cover ratio of 1.13 times.
Investor appetite leaned heavily toward the FXD1/2012/020, a 20-year infrastructure bond issued in 2012 with 6.6 years left to maturity. The paper accounted for 45% of all bids submitted, with the CBK accepting nearly the entire amount offered.
Meanwhile, both the short-term and medium-term papers were priced below par, clearing at KSh 98.00 and KSh 99.13 per KSh 100 respectively, signalling yields above their coupon rates.
The 25-year bond stood out as the only instrument priced above par at KSh 101.81 per KSh 100. Its accepted yield of 13.69% came in 23 basis points below its coupon rate of 13.924%, indicating that investors were only prepared to pay a premium where returns significantly exceeded prevailing market rates.
Non-competitive bids amounted to KSh 19.44 billion, representing roughly 21% of the total accepted amount.
Domestic Borrowing Nears Annual Target
So far in FY2025/26, Kenya’s bond auctions have raised KSh 981.63 billion from total bids of KSh 1.72 trillion against an offered amount of KSh 740 billion.
After accounting for KSh 176.97 billion in redemptions, the government’s net domestic borrowing currently stands at KSh 804.66 billion. That figure represents approximately 91% of the revised domestic borrowing target of KSh 885.9 billion for the fiscal year, leaving an estimated KSh 81 billion borrowing space for the remaining May and June auctions.
The Treasury’s aggressive domestic financing strategy continues in the absence of IMF funding support. Treasury Cabinet Secretary John Mbadi confirmed in March that Kenya was not expecting a fresh IMF programme in the near term, with no IMF financing factored into the 2026 budget framework.
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Two IMF technical assessments published in April also raised concerns over Kenya’s debt disclosure practices, warning that the country’s narrow legal definition of public debt could understate its actual liabilities. The fund further recommended that securitised future tax revenues be classified as debt, a move that could materially reshape Kenya’s fiscal outlook.
Kenya’s domestic debt stock has risen from KSh 6.31 trillion at the beginning of the fiscal year to roughly KSh 7.08 trillion by March 2026.
According to the IMF’s April 2026 Regional Economic Outlook, Kenya’s debt-to-GDP ratio is projected to hit 71.6% in 2026, substantially above the statutory debt anchor of 55%, which the country is legally expected to achieve by 2028.
The CBK is also conducting a KSh 10 billion switch auction from FXD1/2017/010 into FXD1/2021/020, set to close on May 18. The transaction marks the sixth switch auction on record.
Unlike April’s switch auction, which offered investors a steep 239 basis-point reduction in coupon returns and achieved only a 12.8% uptake, the latest offer presents a more attractive 48 basis-point coupon increase from 12.966% to 13.444%.
The CBK has already hinted at additional bond issuances in June as the government continues leaning heavily on the domestic market to finance its fiscal obligations.
