The Treasury has intensified domestic borrowing to finance the current fiscal year's budget needs with the Central Bank of Kenya (CBK) announcing the opening a KSh40 billion bond sale.

Latest transaction will see the CBK mobilise funds from the domestic market through a dual-tranche auction of re-opened 20-year and 25-year fixed coupon Treasury bonds.

In a market update on Tuesday, CBK launched comprises the FXD1/2019/020 bond, with 12.8 years remaining to maturity and a coupon rate of 12.8730 percent, and the FXD1/2022/025 bond, which has 21.4 years to maturity and a coupon of 14.1880 percent. 

The bond sale is scheduled to close on 22nd July, 2026. The 25-year paper offers the highest coupon among current instruments, a factor that could draw significant investor appetite.

Both bonds, which are listed on the Nairobi Securities Exchange, carry a 10 percent withholding tax and qualify for statutory liquidity ratio requirements for commercial banks and non-bank financial institutions.

The latest bond sale comes as the government pursues an aggressive domestic borrowing strategy to bridge a KSh1.146 trillion fiscal deficit for the 2026/27 financial year. 

It also follows a series of bond operations in recent months, including a KSh 60 billion reopening in June that raised KSh 34.38 billion against target, relfecting a performance rate of 85.97 percent.

Bond switch auction

More recently, the CBK launched a KSh10 billion bond switch auction, allowing investors to exchange shorter-dated paper for longer-term securities.

While domestic borrowing remains the primary deficit-financing tool, with a target of KSh 1.03 trillion from the local market, Nairobi is simultaneously diversifying external sources. 

Treasury Cabinet Secretary John Mbadi recently confirmed plans to raise $500 million (KSh 64.6 billion) through a Samurai bond issuance in Japan, following a successful debut Samurai financing of $171.31 million in June that was deployed to the manufacturing and energy sectors. 

That facility, extended by Japan's Nippon Export and Investment Insurance, carried significantly lower interest rates than commercial Eurobonds.

Non-competitive bids, which are open to individuals, have a minimum of KSh 50,000 and a maximum of KSh 50 million, while competitive bids require a minimum of KSh 2 million per Central Securities Depository (CSD) account per tenor. All bids must be submitted electronically via the CBK DhowCSD platform or Treasury Mobile Direct. 

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