The Central Bank of Kenya (CBK) has reopened a pair of long-term bonds seeking Sh40 billion for its April issuance, which is being sold alongside the third switch issuance of the fiscal year that is targeting maturing 10-year paper.
In the reopened bond, the CBK has opted for a 15-year paper first issued in 2020 at an annual interest rate of 12.76 percent, and a 25-year bond that was brought to market in 2018, at an annual interest rate of 13.4 percent.
The 15-year tranche thus has 8.9 years to maturity, while the outstanding period for the 25-year is 17.3 years. The sale runs until April 1.
The issuance continues the recent trend by the CBK of targeting medium to long-term bonds for reissuance, taking advantage of the current demand for higher-yielding papers by investors to drive uptake.
The recent domestic rate cuts by the CBK have pushed investors to go for bonds that have relatively high yields in the primary market, regardless of tenor. The Central Bank Rate (CBR) currently stands at 8.75 percent after the most recent cut of 0.25 percentage points in February, having come down from 13 percent in August 2024.
Previously, long-term securities such as the reopened 25-year paper were the preserve of institutional investors such as pension funds, while banks and retail investors waited for shorter-dated papers.
The February and March bond issuances both included reopened 25-year bonds, alongside 15- and 20-year papers.
These sales were heavily oversubscribed, with the February issuance raising bids worth Sh213.74 billion against its target of Sh50 billion, and the March sale attracting offers of Sh117.4 billion, against a target of Sh60 billion. The CBK accepted Sh100.54 billion in February and Sh60.99 billion in March, respectively.
It will be hoping for similar high demand for the April bond, which is being sold in a period of high liquidity in the money markets, that is likely to support bidding.
At the same time, the CBK is hoping to smooth the maturity profile over the near term with the switch bond sale, which runs until April 13.
The sale sees holders of Sh20 billion worth of notes on a 10-year bond (source bond) that was sold in August 2016 offered the chance to swap into a 15-year paper (destination bond) that was issued in May 2018, which has 7.1 years to maturity.
The 10-year paper, which matures in August 2026, has been paying holders 15.04 percent in annual interest, while the destination bond will pay them 12.65 percent.
This is the third switch bond rolled out in the current fiscal year, part of the government’s wider efforts to lengthen the maturity profile of its domestic debt while lowering short-term refinancing pressure on the exchequer.
The first of the swaps was done in January 2026, and also involved the 10-year 2016 paper that is being switched in the April sale.
In the January sale, investors agreed to roll over Sh25.17 billion worth of notes into a 15-year paper that was floated in 2022, at an annual interest rate of 13.94 percent.
The second switch sale was carried out earlier this month, where holders of a five-year bond that is due to mature in November transferred Sh18.4 billion into a 15-year bond that was issued in 2019.
A switch bond issuance involves the direct conversion of maturing Treasury bills and bonds into a longer term security, cushioning the exchequer from a liquidity crisis in the short term.
Domestic debt maturities are usually funded by rolling over the debt via new bond issuances, and rarely through repayments from tax collections since the government is already running a budget deficit.
Refinancing the debt through ordinary bond sales however means that rollovers can affect the government’s ability to make new borrowing for budgetary purposes, especially when these bonds are undersubscribed.
Swapping a bond therefore helps avoid the competition for funds between maturities and new borrowing.
