The Central Bank of Kenya (CBK) has raised an additional Sh29.2 billion from a tap sale of Treasury bonds in June, as the government’s fiscal agent works to close out its domestic borrowing programe for the 2025/26 financial year amid mounting funding pressure.
The tap sale reopened two long dated papers, the 20 year FXD1/2018/020 and the 25 year FXD1/2021/025, which carry coupon rates of 13.20 percent and 13.924 percent respectively. Investors showed strong interest in the offer, placing bids of Sh31 billion that saw the sale close on its first day, with CBK accepting Sh29.2 billion.
Bond prices on the two papers fell below par value, with investors paying a discount of Sh99.2733 and Sh96.1351 respectively, reflecting rising primary market interest rates and reduced appetite to pay above face value.
Analysts had anticipated the move. “We did expect a second issue in June given the huge budget financing gap with one month remaining to close the FY2025/26 financial year,” analysts at Sterling Capital said in a fixed income note, adding that pressure stemmed from a downward revision of tax revenue projections alongside higher domestic and external borrowing targets in the March supplementary budget.
Gross domestic borrowing receipts through end May 2026 stood at Sh1.179 trillion, leaving a deficit of roughly Sh360 billion against the revised Sh1.539 trillion target for the fiscal year, according to National Treasury data, comprising Sh994.8 billion in net domestic borrowing and Sh544.2 billion in redemptions and rollovers.
This followed an earlier June tap sale of two other reopened bonds FXD1/2020/015 and FXD1/2018/025, carrying coupons of 12.756 percent and 13.400 percent. The sale ran from Tuesday, June 9 to Thursday, June 11, targeting Sh15 billion on a first come, first served basis, with settlement on Monday, June 15. The Central Bank set a minimum investment of Sh50,000, widening access to retail and institutional investors alike.
CBK has characterized the rise in short term interest rates as a market correction, even as it remains under sustained pressure to meet an elevated medium-term domestic borrowing target.
