The government has launched its ambitious domestic borrowing programme on a strong footing after investors more than doubled subscriptions in the first Treasury bond sale of the 2026/27 financial year.
This signals robust demand for government securities despite lingering concerns over long-term interest rates.
Fresh data from the Central Bank of Kenya (CBK) shows investors submitted bids worth Sh144.47 billion against a target of Sh70 billion, translating to an oversubscription rate of 206.4 per cent.
The strong reception offers an encouraging start for the National Treasury, which plans to source Sh890.4 billion from the local market this financial year to help finance the Sh4.78 trillion budget.
The exchequer is expected to plug a fiscal deficit estimated at 4.6 per cent of GDP.
However, the auction also exposed a clear shift in investor preference.
Most investors flocked to shorter-term government paper while showing caution toward locking up money for two or three decades amid expectations that interest rates could change over time.
The 10-year FXD1/2022/010 bond, which matures in May 2032, attracted Sh103.96 billion in bids, nearly 72 per cent of all applications received.
The bond was more than twice subscribed, underlining investors' appetite for medium-term securities offering attractive returns with relatively lower duration risk.
It was priced above its face value at Sh105.14 for every Sh100 and cleared at an accepted yield of 12.9 per cent, below its coupon rate of 13.5 percent, indicating investors were willing to pay a premium for the paper.
In contrast, demand for longer-dated bonds remained subdued.
The 20-year FXD1/2021/020 bond achieved a performance rate of just 29.8 percent and settled at an accepted yield of 14.3 per cent, while the 30-year FXD1/2026/030 bond recorded a 28.1 per cent performance rate.
It attracted only Sh6.03 billion in accepted bids and was priced well below par at Sh88.60, reflecting a weaker appetite for locking in funds over a long period.
Overall, CBK accepted Sh70.6 billion in bids, all representing fresh borrowing, with settlement scheduled for July 13.
The outcome suggests investors remain confident in government debt but are increasingly selective about maturity, favouring shorter-duration instruments while demanding higher returns to hold longer-term bonds.
The latest auction also builds on last year's record borrowing programme, during which the government raised a net Sh1.006 trillion through 19 bond auctions and two tap sales.
This was the largest annual domestic bond issuance on record.
Meanwhile, the Nairobi Securities Exchange (NSE) reported mixed activities during the week ended July 9.
The NSE All Share Index rose 0.78 per cent while the NSE 20 Share Index edged up 0.09 per cent.
Market capitalisation also gained 0.78 per cent, although trading activity slowed sharply, with both equity turnover and the number of shares traded dropping by more than 98 per cent.
