Central Bank of Kenya reopens two bonds targeting Sh50 billion in funding

The Central Bank of Kenya has reopened two long-term Treasury bonds in a new domestic borrowing exercise aimed at raising Sh50 billion for budgetary support, as the government continues to turn to the local market to finance spending needs while offering investors attractive fixed returns over long maturities.

In the notice issued on Tuesday, the Central Bank of Kenya reopened FXD3/2019/015 and FXD1/2021/020, both designed to attract a wide range of investors, including banks, pension funds, and individual participants looking for stable long-term income. The proceeds from the sale will be used for “budgetary support”, reflecting continued reliance on domestic debt to meet fiscal obligations.

The FXD3/2019/015 bond is a 15-year paper with 8.3 years remaining to maturity. It carries a coupon rate of 12.3400% and will mature on July 10, 2034. The FXD1/2021/020 bond is a 20-year instrument with 15.3 years remaining, offering a higher coupon rate of 13.4440% and maturing on July 22, 2041.

Both bonds attract a 10% withholding tax applied on clean prices, with investors expected to consider both the returns and the tax treatment when making investment decisions. The instruments are structured to give exposure to long-term government borrowing while providing fixed and predictable coupon payments.

The sale periods for the two bonds are staggered but end on the same date. FXD3/2019/015 runs from May 13, 2026, to May 20, 2026, while FXD1/2021/020 is open from May 18, 2026, to May 20, 2026. Both will close at 10:00 am on May 20, 2026, with the auction taking place the same day and settlement set for May 25, 2026.

Investors are required to place a minimum bid of Sh50,000 and may invest up to a maximum of Sh50 million per account. Competitive bids must be at least Sh2 million per Central Depository and Settlement account for each tenor. The bonds are open to both competitive and non-competitive bids, allowing broader participation across investor groups.

The Central Bank of Kenya said the bonds may be reopened in future depending on demand and financing needs, noting that “the bonds may be re-opened at a future date,” giving room for flexible issuance based on market conditions.

Secondary trading will begin on May 25, 2026, on the Nairobi Securities Exchange, allowing investors to trade the bonds in multiples of Sh50,000 after listing. The instruments also qualify for statutory liquidity ratio requirements, making them eligible for use by commercial banks and other regulated financial institutions.

The bank also retained discretion over the auction process, stating that it may accept, partially accept, or reject bids without giving reasons, a standard provision in government securities issuance.

On liquidity support, the Central Bank confirmed it will rediscount the bonds as a last resort at 3% above the prevailing market yield or coupon rate, whichever is higher. Investors will be able to initiate rediscount instructions through the DhowCSD Investor Portal or App. The bonds may also be used as collateral to access loans from regulated financial institutions, increasing their flexibility within the financial system.

Pricing data shows yields ranging from 11.0000% to 14.0000%, with clean prices adjusting depending on demand. For FXD3/2019/015, clean prices range from 107.0589 at 11.0000% yield to 92.0319 at 14.0000%. For FXD1/2021/020, prices range from 117.8161 to 96.4799 across the same yield band.

Accrued interest has also been provided for both bonds. FXD3/2019/015 carries accrued interest of Sh4.2715 per Sh100, while FXD1/2021/020 carries Sh3.8781 per Sh100. The Central Bank of Kenya explained that withholding tax is applied on clean prices, with dirty prices calculated by adding accrued interest.

Illustrations show how pricing works in practice. For FXD3/2019/015, a clean price of Sh99.9605 plus accrued interest produces a dirty price of Sh104.232. For FXD1/2021/020, a clean price of Sh99.9465 combined with accrued interest results in a dirty price of Sh103.8246.

Payment details will be available through the DhowCSD Investor Portal or App on May 22, 2026. Investors who fail to meet payment obligations risk suspension from future government securities auctions.

The issuance comes as the government continues to rely heavily on domestic borrowing to finance the national budget, with long-term bonds remaining a key tool for raising funds and managing fiscal commitments.