Kenya Raises KSh260 Billion from Bond Market as Domestic Debt Financing Strengthens

By Benadeta Mwaura - Reporter

Kenya, 29 January 2026 - The Government of Kenya raised KSh 260.05 billion from the primary bond market in the fourth quarter of 2025, underscoring strong investor appetite for government securities even as the country continues to navigate tight fiscal conditions.

The latest auction results reflect both robust demand for fixed-income instruments and deeper engagement by domestic and institutional investors in financing Kenya’s development priorities.

The KSh 260 billion raised represents one of the largest quarterly bond sales in recent years, with funds originating from Treasury bonds issued by the Central Bank of Kenya (CBK) on behalf of the National Treasury.

Analysts say this performance highlights resilient liquidity in Kenya’s bond market and sustained investor confidence despite broader economic pressures.

Several factors are driving the strong performance of Kenya’s bond issuances:

Increased demand for government securities reflects ample liquidity in the financial system and a preference among institutional and retail investors for fixed-income assets with predictable returns.

Recent data shows that bond market turnover on the Nairobi Securities Exchange (NSE) grew significantly, helping the bourse to more than double its bond levy income, a sign that bond trading activity is rising alongside investor interest.

Government bonds with longer maturities have offered competitive coupon rates, often higher than those on short-term Treasury bills, attracting investors seeking yield security amid global rate volatility.

Recent CBK auctions saw substantial oversubscriptions as investors locked in returns on medium- and long-term issues.

With Kenya’s budgetary deficit requiring significant domestic funding, even as external financing sources remain constrained, the bond market has become a crucial channel for mobilising capital without relying exclusively on short-term borrowing or foreign debt.

The strong uptake of government bonds carries significant implications for Kenya’s economy and financial markets:

Raising Sh260 billion from the bond market helps the government meet its financing requirements for infrastructure, public services, and debt servicing without dramatic increases in external borrowing.

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As part of liability management efforts, the government has also conducted Eurobond refinancing and buybacks to ease near-term refinancing pressures.

Robust bond auctions contribute to broadening Kenya’s capital markets, which now offer a wider array of securities including corporate bonds and asset-backed infrastructure bonds.

Recent high-profile corporate issuances, such as Safaricom’s green bond and EABL’s medium-term note, demonstrate how both public and private sectors are tapping these markets to fund investments.

Increased participation from institutional and retail investors supports deeper market liquidity. For example, corporate green bonds have seen oversubscriptions and strong retail interest, illustrating how innovative instruments can widen investor engagement beyond traditional government paper.

While the bond market’s performance is broadly positive, challenges remain. Kenya’s heavy reliance on domestic debt financing has raised questions about the debt-to-GDP ratio and the crowding out of private credit as government borrowing absorbs large portions of available capital.

Policymakers also continue exploring alternative financing mechanisms, such as securitisation of future revenue streams for infrastructure projects, to ease pressure on the traditional bond market.

Moreover, sustaining investor confidence will require continued macroeconomic stability, transparent fiscal policy, and clear execution of development priorities.

For Kenya’s financial markets, the ability to blend innovative products with solid governance practices will be key in maintaining momentum in bond market mobilisation.