The Central Bank of Kenya (CBK) has secured KSh34.38 billion from the reopening of two long-term Treasury bonds, pushing total net borrowing from bond auctions to about KSh925.4 billion through 17 reopenings conducted since July 2025.
Investor bids totalled KSh34.39 billion against the KSh40 billion target, translating to an 85.97% subscription rate. This marks the second straight undersubscribed bond sale after the May 20 reopening attracted KSh47.16 billion against a KSh50 billion offer.
The two bonds were priced above face value, at KSh101.06 and KSh101.16 for every KSh100 nominal value, signalling that prevailing market yields remain below their fixed coupon rates of 12.756% and 13.40%.
The weaker demand is largely attributed to end-of-financial-year balance sheet adjustments by banks and institutional investors, who are limiting additional exposure ahead of the June 30 fiscal year close. Analysts also point to investor fatigue following 16 previous auctions that absorbed more than KSh1 trillion during the financial year.
Data from the CBK shows that across the 17 bond reopenings conducted since July 2025, the government offered KSh820 billion, received bids worth KSh1.797 trillion and accepted KSh1.113 trillion, representing an overall bid-to-cover ratio of 2.26 times. After accounting for KSh187.22 billion in bond redemptions, net borrowing currently stands at KSh925.4 billion.
The latest sale involved the reopening of two benchmark securities: the 15-year FXD1/2020/015 bond, which matures in February 2035, and the 25-year FXD1/2018/025 bond, due in May 2043.
Attention is now turning to the upcoming financial year and the monetary policy outlook. Kenya’s inflation rate climbed to 6.7% in May 2026 from 5.6% in April, driven by higher food, transport, housing and energy costs. Food prices rose 9.4% year-on-year, transport costs increased 16.5%, while housing and energy costs recorded a 3.4% rise.
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The increase places inflation above the CBK’s preferred midpoint target of 5% and closer to the upper limit of its 2.5%-7.5% target range.
With the Monetary Policy Committee scheduled to meet on June 9, a day after the bond auction settlement, market expectations are shifting. Following ten consecutive rate cuts that lowered the Central Bank Rate from 13% to 8.75%, analysts believe the easing cycle has likely come to an end. While policymakers are expected to keep rates unchanged, rising inflationary pressures suggest any future adjustment is more likely to be an increase rather than another cut, a factor expected to influence bond market performance in the 2026/27 financial year.
