The National Treasury has raised a substantial Ksh180 billion through a successful tap sale of government bonds, capitalizing on elevated market liquidity and strong investor appetite for fixed-income assets.
The transaction, which targeted both retail and institutional investors, exceeded initial expectations, providing a timely boost to government coffers amid mounting fiscal pressures.
According to the Central Bank of Kenya, which managed the auction on behalf of the Treasury, the bond tap attracted bids worth over Ksh220 billion, signalling strong demand from banks, pension funds, and insurance firms seeking safe havens in a volatile economic environment.
The final uptake was capped at Sh180 billion, aligned with the Treasury’s borrowing plan for the current quarter.
This comes at a time when liquidity levels in the banking sector remain high due to subdued credit uptake by the private sector and recent maturities of previous government securities.
Analysts say investors are increasingly leaning toward government bonds, drawn by attractive yields and the relative safety of state-backed instruments.
“The success of the tap sale reflects a combination of factors, including high liquidity in the market, cautious investor sentiment, and attractive bond pricing,” said Sarah Mugo, a fixed-income analyst at Kestrel Capital. “It also suggests that the government still has some room to raise funds locally without putting excessive pressure on interest rates.”
The proceeds from the bond tap will be used to meet part of the government’s domestic borrowing targets for the 2025/2026 fiscal year, as outlined in the budget.
Kenya is expected to raise over Sh500 billion from the domestic market this financial year to finance its expenditure plans and service existing debt.
Despite the successful sale, concerns remain over the rising cost of borrowing and the sustainability of domestic debt. The weighted average interest rate for the bonds sold stood at 16.8 percent, slightly higher than previous auctions, reflecting the market’s demand for higher returns in the face of inflationary risks.
Treasury officials, however, defended the borrowing strategy, saying it balances the need for funding with market dynamics. They noted that the government is also exploring external concessional financing and debt restructuring options to ease the domestic burden.
With investor confidence holding steady and the Treasury keeping a close eye on rate movements, further tap sales and primary auctions are expected in the coming months to sustain government operations and support economic recovery.
Written By Ian Maleve
