Investors have maintained a strong appetite for government securities, with the Treasury's second bond auction of the 2026/27 attracting more than twice the amount on offer.
The trend shows sustained confidence in state debt despite plans to reduce domestic borrowing.
The Central Bank of Kenya (CBK) raised Sh63.28 billion from the July 22 dual-tranche Treasury bond auction after receiving bids worth Sh85.9 billion against an advertised target of Sh40 billion, translating to a subscription rate of 214.8 per cent.
The performance follows another heavily subscribed bond sale held a fortnight earlier, signalling robust demand from pension funds, banks, insurance firms and other institutional investors seeking long-term fixed-income investments.
The latest auction involved reopened 20-year and 25-year Treasury bonds maturing in March 2039 and September 2047, respectively.
The strong demand has enabled the government to make significant progress in funding its budget early in the financial year.
The National Treasury has already raised Sh133.88 billion, representing about 15 per cent of its Sh890.4 billion net domestic borrowing target through Treasury bonds and Treasury bills for the current financial year.
The longer-dated 25-year bond once again dominated investor interest, attracting bids worth Sh61.9 billion, accounting for more than 72 per cent of total subscriptions.
The bond carries a 14.2 per cent coupon, the highest among currently available government securities.
It was accepted at a yield of 14.4 per cent, with investors willing to pay above face value.
In contrast, the reopened 20-year bond attracted weaker demand, recording a subscription rate of 59.9 per cent.
The security, which carries a lower coupon of 12.9 per cent, was priced below par and accepted at a yield of 13.9 per cent.
The results reinforce a trend that has emerged in recent auctions, with investors increasingly favouring higher-coupon securities that provide higher regular income even when maturities are similar.
Demand was equally firm in the Treasury bill market.
The Treasury bill auction conducted on July 23 attracted bids worth Sh38.5 billion against an advertised Sh28 billion, representing a subscription rate of 137.5 per cent.
Yields on the 91-day, 182-day and 364-day bills eased marginally, suggesting improving liquidity and growing confidence in macroeconomic stability.
The sustained investor appetite comes even as the government plans to reduce its reliance on the domestic market.
Last week, the National Treasury lowered planned net domestic borrowing by about Sh132 billion compared with the previous financial year.
The move is intended to ease pressure on local credit markets and reduce the risk of crowding out private businesses seeking loans from commercial banks.
The strategy forms part of a broader fiscal consolidation programme aimed at lowering borrowing costs while moving the government away from expensive commercial external debt that has weighed heavily on public finances in recent years.
Rather than relying on costly Eurobonds and syndicated commercial loans, the government plans to increasingly mobilise financing through concessional multilateral lenders, public-private partnerships and the National Infrastructure Fund.
The fund is expected to pool long-term capital from pension funds, insurance companies, sovereign investors and development finance institutions to finance commercially viable infrastructure projects.
By attracting private investment into roads, energy, water, housing and logistics projects, the government hopes to reduce dependence on debt-funded public infrastructure while freeing up fiscal space for essential public services.
Meanwhile, activity at the Nairobi Securities Exchange also improved during the week ended July 23.
The NASI, NSE 20 and NSE 25 share indices posted gains, while equity turnover jumped 50.8 per cent and bond turnover in the secondary market rose 37.7 per cent, reflecting increased trading activity across Kenya's capital markets.
