Kenya turned to a bond switch auction in January 2026 to push domestic debt repayments further into the future, deferring about KSh 25 billion to 2037 without raising new cash as refinancing pressures intensified.
The operation, only the third bond switch ever conducted by the Treasury, underlined the government’s increasing reliance on liability management measures to ease redemption pressures and extend debt maturities. In the January 21 exercise, investors exchanged the August 2026 bond (FXD1/2016/010) for the longer-dated FXD1/2022/015, which matures on April 6, 2037 and has just over 11 years remaining.
Although the Treasury had offered KSh 20.0 billion, it accepted KSh 25.17 billion after bids reached KSh 26.49 billion, translating into a performance rate of 132.46 percent. Competitive bids made up KSh 21.71 billion of the accepted amount, while non-competitive bids accounted for KSh 3.47 billion. The weighted average yield settled at 13.1669 percent, below the bond’s coupon rate of 13.942 percent, resulting in a premium price of KSh 107.99 per KSh 100. Demand was supported by the bond’s eligibility for statutory liquidity requirements and Central Bank of Kenya rediscounting, despite the elevated yield environment.
Crucially, the switch did not provide fresh liquidity to the government. Participation was voluntary and limited to holders of unencumbered FXD1/2016/010 securities, allowing the Treasury to postpone cash repayments ahead of the bond’s August 2026 maturity. Investors could swap part or all of their holdings, replacing an imminent redemption with a longer stream of coupon payments.
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The January transaction followed two earlier switches that set the precedent. In June 2020, during the pandemic, Treasury refinanced KSh 20.23 billion using a six-year bond, raising less than KSh 1.0 billion in net new cash. In December 2022, it rolled over KSh 47.75 billion by converting Treasury bills and bonds into a six-year bond maturing in November 2028 at a yield of 13.215 percent. Combined with the January 2026 deal, the three switches have rolled over more than KSh 90 billion in domestic debt.
These operations form part of a broader strategy to lengthen maturities. By end-June 2025, the average time to maturity of Kenya’s Treasury bond portfolio had risen to 7.49 years from 7.36 years a year earlier, supported by sustained issuance and reopening of medium- and long-term bonds. Bonds now account for roughly 83 percent of domestic issuance, reducing dependence on short-term Treasury bills and easing rollover risk.
