The Central Bank of Kenya (CBK) during the week announced results for the re-opened infrastructure bonds IFB1/2018/015 and IFB1/2022/019, with tenure to maturities of 7.6 years and 15.6 years and fixed coupon rates of 12.5% and 13.0% respectively.
Demand was strong, with the bonds recording an overall subscription rate of 359.4%. Investors placed bids worth Kshs 323.4 billion against the Kshs 90.0 billion on offer. The government accepted Kshs 95.0 billion, reflecting a 29.4% acceptance rate.
The weighted average yields for accepted bids were 13.0% for IFB1/2018/015 and 14.0% for IFB1/2022/019. The 13.0% yield for IFB1/2018/015 was higher than the 12.5% recorded at its last reopening in January 2018. The 14.0% yield for IFB1/2022/019 was lower than the 15.0% recorded at its last reopening in February 2022.
With July 2025 inflation at 4.1%, the real returns stand at 8.9% and 9.9% for IFB1/2018/015 and IFB1/2022/019 respectively.
The results reflect current market trends:
- Investors are pursuing higher yields, with the reopened bonds offering returns above most money market funds and fixed deposits.
- Expectations of falling yields, following the Monetary Policy Committee’s 25 basis point cut in the CBR to 9.50%, are driving demand.
- The government is maintaining discipline by rejecting expensive bids, as shown by the 29.4% acceptance rate.
- Banks remain significant participants, increasing holdings of government securities as seen in H1 2025 results from several lenders.
For investors, these dynamics underscore the need to balance returns, liquidity, and risk. A diversified portfolio remains key to meeting investment objectives in a shifting interest rate environment.
