Treasury bonds saw stable demand in the third quarter of 2025 despite lower yields attributed to cuts in the Central Bank Rate (CBR).
During the review period, the Central Bank of Kenya (CBK) reopened seven bonds and issued two tap sales which received bids amounting to KES 713.15 billion. The CBK accepted KES 405.28 billion, representing 162.1% acceptance rate and a 62.4% increase from KES 249.53 billion raised from Treasury bonds in the second quarter of 2025.
According to the National Treasury’s 2025 Budget review and outlook paper, Kenya’s fiscal deficit for the current fiscal year (2025/2026) is projected at KES 901 billion, equivalent to 4.7% of GDP. The deficit is set to be financed by a net foreign financing of KES 287.4 billion, equivalent to 1.5% of GDP, while KES 613.5 billion will be sourced domestically. In the first quarter of the fiscal year (Q3 2025), the government targeted to raise KES 250 billion. However, it surpassed its target by KES 155.28 billion.
The Capital Markets Authority (CMA) attributed the steady uptake in Treasury bonds to low inflation, stable interest rates, and the low risk nature of Treasury securities. The secondary market recorded growth, with the turnover value of traded bonds amounting to KES 684 billion in the third quarter of 2025, up 2.63% from KES.666.5 billion recorded in Q2 2025 and 74.9% year-on-year. The upturn in the secondary bond market highlights increased liquidity and growing investor confidence in Kenya’s fixed-income segment.
Treasury Bonds performance amid Rate Cuts
The strong performance in the bond market during the review period coincided with the CBR cuts. The Monetary Policy Committee (MPC) of the CBK cut the rate with a cumulative 350 basis points to 9.50% in August 2025, from 13.00% in August 2024. Currently, the CBR stands at 9.25%, following the 8th consecutive cut in October 2025 by the apex bank.
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