The Central Bank of Kenya (CBK) has announced plans to issue two Treasury bonds, a 15-year and a 20-year bond, in its October issuance, targeting Sh50 billion. The 15-year bond, first issued in July 2019 at a rate of 12.34 percent, and the 20-year bond, initially sold in April 2019 at 12.873 percent, have been reopened multiple times in the last 12 months. This move is aimed at riding the demand they attracted last month to hit the target.
The two bonds have been reopened five times in the last 12 months, making them among the go-to bonds for the CBK in its recent domestic borrowing program. The 20-year paper was reopened in January, March, May, July, and September this year, while the 15-year paper was brought back to market in November 2025, and in February, March, May, and September 2026. This repeated reopening has led to a significant increase in their outstanding amounts.
The outstanding amount on the 15-year bond has climbed from Sh50.6 billion in 2019 to Sh161 billion, while the 20-year paper has increased from Sh9 billion at first issuance to Sh209.8 billion currently. The CBK is anticipating that the demand seen earlier this month on the two bonds will carry forward into the October sale. Earlier this month, the 15-year paper attracted bids of Sh57.1 billion, while the 20-year bond had bids of Sh43.8 billion.
The government's fiscal agent has been looking to lock in as much borrowing as possible in the early months of the fiscal year. This strategy aims to help manage interest rate expectations later in the year when the country will be closing in on a general election. Net borrowing in the first two months of the fiscal year stood at Sh406 billion, equivalent to 41 percent of the full year target of Sh987.4 billion.
With the additional borrowing of Sh97.92 billion in September, the net borrowing has now hit 51 percent of the year's target. The CBK has also been refinancing the government's domestic debt through monthly switch bond sales. In the most recent swap sale on September 7, investors moved Sh11 billion from a 15-year bond into a 10-year security.
The CBK is also conducting an October switch sale, targeting Sh10 billion from a three-year bond and a 15-year paper. Holders of these bonds have been given the chance to transfer part of their capital into another 15-year bond that was sold in May 2018. This move aims to provide investors with an exclusive chance to transfer their investment into longer-dated alternatives.
The Central Bank of Kenya's domestic borrowing program is crucial in meeting the government's fiscal targets. The successful issuance of the two bonds will help the government achieve its borrowing goals and manage its domestic debt. The CBK's strategy of reopening familiar bonds and conducting switch sales is aimed at maintaining investor confidence and achieving its targets.
Key points
- The Central Bank of Kenya targets Sh50 billion with two Treasury bonds, a 15-year and a 20-year bond.
- The two bonds have been reopened multiple times, leading to a significant increase in their outstanding amounts.
- The government's fiscal agent aims to lock in as much borrowing as possible in the early months of the fiscal year to manage interest rate expectations.
