By Andrew Kariuki,

The Central Bank of Kenya (CBK) has announced a switch auction allowing investors to convert their holdings from the FXD1/2017/010 Treasury bond into the longer-dated FXD1/2021/020 bond, as part of ongoing efforts to manage public debt and extend the government’s maturity profile.

According to the prospectus, the source bond (FXD1/2017/010) has a remaining tenor of approximately 1.2 years, maturing on July 19, 2027, and carries a coupon rate of 12.9660 percent. Investors will have the option to switch into the destination bond (FXD1/2021/020), which has a significantly longer tenor of 15.22 years, maturing on July 22, 2041, and offers a higher coupon rate of 13.4440 percent.

The total amount on offer under the switch auction is Ksh10 billion, with the sale period running from April 23, 2026, to May 18, 2026. The deadline for bid submission is May 18, 2026 at 10:00 a.m., with the auction scheduled for the same day and settlement set for May 20, 2026.

The auction will be conducted using a multi-price format, where successful bidders receive allocations based on the yields quoted. The source bond has a reference yield of 8.7205 percent and a dirty price of 108.8972, while the destination bond will be allocated based on submitted yields.

Participation is limited to investors holding the FXD1/2017/010 bond as at the auction date, and switching is voluntary. Investors may choose to convert either part or the entire nominal value of their holdings.

CBK has set the minimum non-competitive bid at Ksh50,000 and the maximum at Ksh50 million, while competitive bids require a minimum of Ksh2 million per CDS account per tenor.

The prospectus further outlines that successful bidders will receive allocation details via the DhowCSD platform on the auction date. Any residual amounts below the minimum investment threshold will be refunded after settlement.

The destination bond continues to qualify for statutory liquidity ratio requirements, making it suitable for banks and financial institutions. Investors may also use government securities as collateral, although any pledged securities must be released at least five days before the settlement date to participate in the switch.

CBK noted that it reserves the right to accept bids in full or in part, or reject them entirely without providing reasons.

Additional details indicate that the destination bond accrues interest at Ksh3.6934 per Ksh100, with withholding tax applied on the clean price. For example, at a quoted yield of 13.4440 percent, the dirty price would be the clean price plus accrued interest.

Coupon payment schedules have also been outlined, with the source bond paying its remaining coupons up to maturity in July 2027, while the destination bond will provide semi-annual coupon payments extending through to July 2041.

The switch auction reflects the government’s broader strategy to refinance short-term debt into longer-term instruments, reducing refinancing risk while offering investors an opportunity to lock in higher long-term returns.