The National Treasury is seeking Sh50 billion from the first bond sale of the 2025/2026 fiscal year where it is targeting to borrow Sh635.5 billion from the domestic market.
A prospectus of the bond posted on Tuesday by the Central Bank of Kenya (CBK) shows that the government is reopening a pair of 20 and 25-year papers that were first introduced into the market in 2018.
The 20-year bond, which has 12.8 years to maturity, comes with a coupon (actual payable interest rate) of 13.2 percent, while the 25-year has a coupon of 13.4 percent and 18 years to maturity.
The sale of the two bonds comes just a week after the CBK closed the auction of the June issuance, which raised Sh71.64 billion against a target of Sh50 billion, having received investor offers worth Sh101.35 billion.
The interest rates on offer on the new issuances also match the average demands by investors on the June bond, which also comprised reopened 15 and 30-year bonds with periods to maturity of 9.7 years and 15.7 years, respectively.
On these June bonds, the 15-year paper saw investors asking for a return (yield) of 13.6 percent against a coupon of 12.75 percent, with the CBK settling at an average yield of 13.48 percent on accepted bids.
The 30-year bond which had a coupon of 12 percent had investors asking for a yield of 14.18 percent, with the CBK settling accepted bids at 13.99 percent.
This resulted in the CBK offering price discounts to the buyers in order to compensate them for taking up bonds that carried a lower fixed interest rate than they had asked for in order to lend to the government.
Investors are, however, paid interest at the coupon rate, and upon maturity of the bond, they are given back the face value of their paper.
Traders said that the CBK is hoping to ride on the ample liquidity in the market that led to the June issuance being oversubscribed to kick off its new year borrowing programme on a high note.
The budget deficit for the 2025/2026 fiscal year has been set at Sh923.2 billion, which will be financed through domestic borrowing of Sh635.5 billion and external borrowing worth Sh287.7 billion.
This projected deficit is lower than that of the current fiscal year by Sh74.3 billion, now that the government has indicated that it will be closing the year with net borrowing of Sh997.5 billion as per the third supplementary budget which was tabled in Parliament last week.
This is in keeping with the recent trend of upward revisions of the budget deficit.
In the original projections carried in the June 2024 budget statement, the government had targeted a deficit of Sh597 billion, which was then revised up to Sh768.6 billion in the first Supplementary budget of August 2024.
The second supplementary budget that was passed in March 2025 had a deficit of Sh887.2 billion, which was to be funded by domestic borrowing of Sh605.7 billion and external borrowing of Sh281.5 billion.
