The Central Bank of Kenya (CBK) announced a voluntary switch auction that will allow investors holding Treasury bond FXD1/2016/010 to exchange their positions for the re-opened FXD1/2022/015 in a move aimed at enhancing market efficiency and managing the government securities portfolio.
Acting as fiscal agent for the Republic of Kenya, the CBK said it is inviting bids for the Sh20 billion switch window running from December 9, 2025 to January 19, 2026.
In its prospectus, the Bank outlined that participation in the auction is on a voluntary basis, and investors may opt to switch part or the entire holding (face value) in the bond.
Investors are only eligible if they hold unencumbered positions in FXD1/2016/010 as at the auction deadline on January 19.
The source bond, FXD1/2016/010, carries a coupon of 15.039 percent and has 0.6 years to maturity, ending on August 17, 2026.
Its dirty price has been set at 110.2682, anchored on its yield of 8.0277 percent. The destination bond, FXD1/2022/015, offers a coupon of 13.942 percent and has 11.3 years to maturity, maturing on April 6, 2037.
The CBK indicated that the multi-priced based on yield quoted method will determine the pricing of bids for the longer-tenor bond.
The auction will be conducted under a multi-price auction method, with investors submitting competitive and non-competitive bids ahead of the 10:00 a.m. deadline on January 19, 2026.
Non-competitive bids will be accepted for amounts between Sh50,000 and Sh50 million, while competitive bids will require a minimum of Sh2 million per CSD account per tenor.
CBK emphasized that all bids must be submitted via the DhowCSD system, noting that all successful bidders should obtain details of amounts allocated from the DhowCSD Investor Portal/App under the Bids tab on Monday, January 19, 2026.
The Bank reiterated its discretion on allocations, stating that it reserves the right to accept applications in full, in part, or reject them entirely without giving any reason.
Settlement for the switched positions will take place on January 21, 2026, with the CBK confirming that successful investors’ portfolios will be updated accordingly.
The Bank added that any remaining cash below the minimum investment threshold of Sh50,000 would be refunded on settlement day.
It also advised that investors with outstanding pledges need to cancel them five (5) days before the switch value date to be eligible to participate in the switch auction.
The CBK further outlined several operational features of the switch bond. Both the source and destination bonds attract a 10 percent withholding tax, qualify for statutory liquidity ratio requirements, and may be re-opened in future as market conditions dictate.
The Bank also reiterated its rediscounting policy, stating that it will rediscount the bonds as a last resort at 3 percent above the prevailing market yield or coupon rate whichever is higher.
Instructions for rediscounting will be transmitted exclusively through DhowCSD, via the Create new → Rediscount option under the Instructions tab.
The switch auction is expected to draw interest from investors seeking longer duration exposure, improved liquidity management, or alignment with their portfolio strategies.
However, participation remains entirely optional, with CBK reaffirming that only holders of unencumbered FXD1/2016/010 positions will be allowed to take part.
