Having eased immediate refinancing pressures through a recent switch auction, the government has returned to the market to raise fresh cash, launching a KSh 50 billion bond reopening in February as domestic investors continue to carry the burden of funding the FY2025/26 budget in the absence of IMF-backed external support.
The Central Bank of Kenya has reopened two fixed-rate infrastructure bonds, FXD3/2019/015 and FXD1/2018/025, offering investors 15-year and 25-year maturities. This marks the second bond reopening of the 2026 calendar year and will test how much additional absorption capacity remains in the domestic market as borrowing intensifies in the latter half of the fiscal year.
The auction is scheduled for 11 February, with settlement set for 16 February. Proceeds from the offer will be applied directly to budget financing.
The move follows a switch auction completed earlier in the week, in which CBK exchanged holdings of a shorter-dated bond for a longer-tenor issue. The operation extended the government’s maturity profile and reduced near-term refinancing risk without increasing the overall debt stock, allowing the Treasury to separate liability management from new funding and return to the market with a clean cash-raising exercise.
The February reopening comes amid heavy domestic borrowing in FY2025/26. Between July and January, Treasury bond reopenings totalling KSh 440 billion attracted bids of around KSh 1.17 trillion, resulting in accepted amounts of approximately KSh 645.8 billion. After accounting for redemptions of KSh 119.8 billion, net domestic borrowing from bonds stood at about KSh 526.0 billion, excluding Treasury bills used for short-term liquidity management.
January saw the first bond auction of 2026, with CBK raising KSh 60.6 billion from bids of KSh 71.5 billion for 20- and 25-year fixed-rate bonds, underscoring sustained investor appetite for long-dated securities. Pension funds and insurers have continued to anchor demand at the long end of the yield curve, enabling the Treasury to front-load issuance while containing rollover risk.
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Under the FY2025/26 financing plan, the government is targeting KSh 901.0 billion in net funding, split between KSh 613.5 billion from domestic borrowing and KSh 287.4 billion from external sources. As of early 2026, no IMF disbursements have been received, and other flexible external budget-support inflows tied to IMF signalling remain outstanding.
While project-linked external loans continue to flow, these funds are earmarked and offer limited relief for day-to-day cash needs. In their absence, medium- and long-term bond issuance has become the primary source of budget financing.
With external support still unresolved, sustained demand for long-dated bonds has shifted from being merely supportive to being essential in maintaining funding momentum and preventing renewed pressure at the short end of the yield curve.
