The Central Bank of Kenya (CBK) has successfully raised Sh35.2 billion from a reopened 25-year bond, surpassing its target of Sh25 billion, highlighting strong investor demand for long-term securities amid a declining interest rate environment.
The bond, initially issued in 2018, saw an oversubscription rate of 188.05 percent, with investors bidding Sh47 billion. Buyers are set to pay Sh100.3701 for every Sh100 unit of the paper, offering a significant discount when accounting for an accrued interest of Sh3.0923 per Sh100. Without the discount, the full price of the bond would have been Sh103.0384.
The auction’s impressive performance reflects the market’s appetite for long-dated bonds as interest rates trend downward. The bond’s 25-year maturity makes it the fourth longest-tenured Kenyan government debt, underscoring the CBK’s ongoing strategy to extend the maturity profile of domestic borrowing.
Of the Sh35.2 billion raised, Sh27.6 billion will be used to retire a 15-year bond due for redemption shortly, while the remaining Sh7.5 billion represents new borrowing for the Exchequer. The auction’s success could pave the way for further long-term issuances in the near future.
With an implied yield of 13.8033 percent from the auction and a coupon rate of 13.4 percent, the bond remains attractive for institutional investors like pension funds and insurance firms seeking stable, high-yield returns.
The CBK’s recent rate cuts have spurred demand for long-term securities, driving activity in the secondary market at the Nairobi Securities Exchange. As the government continues to balance domestic debt management with market needs, the success of this auction signals robust investor confidence and the appeal of Kenya’s long-dated bonds.
