The Central Bank of Kenya (CBK), has released the results of its latest Treasury bond auction, revealing robust investor appetite for long-term government paper. The dual-tranche sale, which featured re-openings of two existing bonds was oversubscribed by 20% and successfully raised KES 60.58 billion, providing critical funding for the government’s fiscal operations.
Treasury Bond Tenors and Investor Appetite
The auction, held on January 7, 2026, invited bids for two long term treasury bond instruments: the FXD1/2019/020, a twenty-year bond which matures on 21st March 2039; and the FXD1/2022/025, a twenty-five-year bond which matures on 23rd September 2047. Collectively, the government offered KES 60 billion. Investor response was markedly positive, with bids received totaling KES 71.54 billion (KES 23.36 billion for the 20-year and KES 48.18 billion for the 25-year bond), translating to an overall performance rate of 119.24% and a bid-to-cover ratio of 1.18.
This strong demand was consistent across both tenors, with the 20-year bond achieving a bid-to-cover of 1.15 and the 25-year bond seeing a ratio of 1.19. This oversubscription indicates sustained confidence among domestic financial institutions in the government’s long-term creditworthiness.
Following the auction, the CBK accepted a total of KES 60.58 billion, adhering to its discretion to reject bids deemed too expensive. The accepted amount comprised KES 20.24 billion from the 20-year bond and KES 40.34 billion from the 25-year bond. Of the total accepted, KES 43.98 billion came from competitive bids, where investors specify their desired yield, while KES 16.60 billion from non-competitive bids, which are accepted at the weighted average rate of the successful competitive bids.
The pricing dynamics of the auction underscored the typical yield curve relationship, where longer tenors command higher returns due to increased risk over time. The market weighted average rate, reflecting all bids received, was 13.3289% for the 20-year bond and 13.7907% for the 25-year bond. The more crucial weighted average rate of accepted bids, which determines the government’s actual cost of borrowing, was set lower at 13.2623% and 13.7561%, respectively. While the 25-year bond cleared at a yield below its fixed coupon rate of 14.1880%, the 20-year bond’s accepted yield remained marginally above its 12.8730% coupon. Nonetheless, strong demand resulted in both bonds pricing above par at KES 101.0158 and KES 106.1818 per KES 100 face value.
The CBK confirmed that the entire KES 60.58 billion raised constitutes new borrowing. This indicates the funds will be channeled into the national budget, primarily to finance the fiscal deficit and manage the government’s domestic debt portfolio, including the redemption of upcoming maturities.
Looking ahead, the CBK has already signalled its continued reliance on the domestic debt market. In the same release, Director of Financial Markets David Luusa announced forthcoming Treasury bond issue for February 2026. While the specific details on tenor, amount, and coupon rates are yet to be finalized, the advance notice allows market participants to prepare their liquidity and investment strategies.
The successful auction demonstrates the depth and liquidity of Kenya’s domestic capital market, providing the Treasury with a viable avenue for sourcing long-term financing.
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