The Central Bank of Kenya (CBK) has announced a switch auction designed to migrate KES 20 billion in liabilities from a nearing-maturity Treasury bond to a longer-dated instrument. This voluntary transaction aims to optimize the national debt profile by shifting holdings from the short-term FXD1/2016/010 bond to the medium-term FXD1/2018/015 bond.
Bonds’ Auction Profiles according to the CBK
Source Bond (FXD1/2016/010): This five-year paper is nearing the end of its life cycle, with only 0.3 years remaining to maturity. It carries a high coupon rate of 15.0390% and is scheduled for final maturity on August 17, 2026. For this auction, it has been assigned a yield of 7.6659% and a dirty price of 104.7992.
Destination Bond (FXD1/2018/015): This fifteen-year paper offers investors a significantly longer horizon, with 7.1 years remaining to maturity. It carries a coupon rate of 12.6500% and matures on May 9, 2033. The destination bond attracts an accrued interest of KES 5.1782 per KES 100.
The switch will be conducted as a multi-price auction, where successful bidders receive allocations based on the yields they quote. Participation is restricted to investors with unencumbered holdings in the source bond as of April 13, 2026.
This initiative is a critical component of Kenya’s broader Medium-Term Debt Management Strategy (MTDS), which prioritizes reducing refinancing risks. By lengthening the average time to maturity of the domestic debt portfolio, the CBK effectively defers significant repayment obligations from 2026 to 2033. This strategy is designed to minimize the costs of debt and reduce the immediate debt burden, which the government aims to lower from 5.4% of GDP to 4.6% by 2028.
Consistent with other government securities, these bonds qualify for statutory liquidity ratio requirements for commercial banks and can be pledged as collateral for loans from regulated financial institutions. The CBK also maintains a rediscounting facility as a last resort, set at 3% above the prevailing market yield or coupon rate.
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