By Michelle Ndaga
Kenya’s Treasury bill market continues to defy gravity: even as yields fall to their lowest levels in months, investor demand shows no sign of cooling, with the 364-day paper emerging as the clear favourite.
In the latest auction, the one-year T-bill closed at 9.58 per cent, down from 9.71 per cent a week earlier, according to Central Bank of Kenya data published in the Business Daily. The 182-day paper eased to 8.11 per cent and the 91-day instrument slipped to 8.01 per cent.
The decline follows the Central Bank’s decision last month to cut its benchmark rate to 9.5 per cent, reinforcing expectations of a sustained low-interest environment. Yet rather than retreat, investors have rushed in. A recent sale of 364-day bills drew bids worth Sh23.1 billion against an offer of just Sh10 billion, producing an oversubscription rate of 231 per cent, The Star reported.
Market analysts interpret the surge as a classic flight to duration. With further monetary easing widely anticipated, institutions and high-net-worth individuals are locking in yields on longer-dated paper before rates fall even lower.
For the Treasury, the trend is welcome relief. Lower yields translate directly into reduced debt-servicing costs at a time when fiscal pressures remain acute. The government has leaned heavily on domestic borrowing to plug budget gaps, and every basis point saved eases the strain on public finances.
The combination of softening rates and voracious demand highlights a rare sweet spot in Kenya’s money markets: investors chasing relative value while the state enjoys cheaper funding.
How long the equilibrium lasts will depend on inflation trends, currency stability and the Central Bank’s next moves, but for now the Treasury bill auction remains the place where Kenya’s economic anxieties momentarily quieten.
