November Primary Pre-auction Note – Re-opened FXD3/2019/015 & FXD1/2022/025
The National Treasury further re-opened other two papers, FXD3/2019/015 (8.7-years) and FXD1/2022/025 21.9 (years), seeking an additional KES 40 billion from the public for budgetary support. With-holding tax rate for the two paper is 10% for each.
The auction comes immediately after an oversubscription of KES 232.2% or KES 92.91Bn received in the first auction, where the government accepted KES 52.83Bn to represent a 132.1% performance against a KES 40.00Bn target. This is even as the government seeks to restructure its short-term obligations to long-term papers while also providing investment avenues for medium and short-term papers.
We expect a general oversubscription supported by overflows and rejections from the first auction, bolstered by re-investments from KES 80.28Bn coupon payouts due in November 2025. Part of the coupons totaling to KES 54.40Bn and KES 13.85Bn was paid out on 10th November and 17th November as KES 0.52Bn comes due on 24th November 2025, respectively.
December 2025 payouts stand at KES 72.90Bn, of which KES 25.20Bn are maturities and KES 47.70Bn coupon payments.
In view of these and other factors discussed hereafter, we recommend the following rates for your bidding consideration:
[Graph in PDF]
FXD3/2019/015 of 12.34% coupon has a holding of KES 53.92Bn with its coupons set for January and July annually till maturity on 10th July 2034. We expect the paper to receive heavy tractions owing to its relatively short tenure of 8.7-years.
The FXD3/2019/015 rarely trades in the secondary market with the last transactions recorded in late October and late September 2025. As its outstanding amount improves, we expect the paper to become quite active in the secondary trading.
Currently, the paper’s yield curve rate ranges between 12.57% and 12.77% while its implied yield varies between a low of 12.29% and 12.39% for the past two weeks.
FXD1/2022/025 has an outstanding amount of KES 141.08Bn with its coupons scheduled for April and October annually. The paper appears to be the most appropriate for re-openings with this being the fourth re-opening on the same paper, in 2025 plus a tap sale issued in April 2025.
On its last re-issue of September 2025, FXD1/2022/025’s market weighted average rate was 14.2456% while the government accepted bids of 14.1423% and cut rate of 14.240%.
Primary Bonds Market Performance
November’s first primary auction was oversubscribed at 232.2% or KES 92.91BN while the government accepted KES 52.83Bn, a 132.1% performance against the KES 40.00Bn target.
The performance was supported by the above KES 80.28Bn coupon payouts for November and new funds especially from pension funds, insurances, fund managers and other savings.
In this auction we expect oversubscriptions to persist supported by the above overflows from the rejected amount and other payouts due on the auction’s value date.
[Graph in PDF]
The BUYBACK offer for FXD1/2023/003 maturing on 11th May 2026, saw a total of KES 34.30Bn subscriptions while the government accepting KES 20.08Bn out of the total KES 76.54Bn. The subscribed market rate average at 7.7806% while the government accepting bids of 7.8019%
Secondary Bonds Market Performance
Secondary bond market continues to be active, transacting KES 96.43Bn in the first two weeks of November in relation to KES 71.21Bn traded same period in October 2025.
The on the run papers continue to rally the market with FXD1/2021/20 re-opened in October and this auction’s re-opened paper FXD1/2022/025 occupied the first two positions, see table below for more.
In November 2025 we anticipate the same movement as the primary investors are run to offload their papers immediately after the auction to cash in on early capital gains.
[Graph in PDF]
Yield Curve
Constant primary re-openings continue impact the yield curve with both upward shifts and downward shifts. The yield curve between the 8-year and 14-year papers shifted downwards largely on impact from the first primary auction for the FXD1/2012/020 (7-year) and the FXD1/2022/015 (11.4-year) papers.
The long-end curve of above 14-years all the way to 22-years has largely shifted upwards on impact from this upcoming auction.
We further expect, upward shifts around the 8-year and 21.9-year papers as investors push for better discounts which will make them commit their funds for such periods.
[Graph in PDF]
Treasury Bills
Narrowing returns on investments continue to witness a shift in investments in treasury bills. In October, T-bills were undersubscribed at 97.6% or KES 93.72Bn against a KES 96.00Bn target. This is despite the sector receiving maturities of KES 125.03Bn in October 2025.
In November 2025 T-bill maturities are projected at KES 147.55Bn part of which we expect to be re-invested back.
Investors’ preference however remains on the 364-day paper on what is viewed to be its relatively higher returns of 9.3467% as at the end of October. The 91- and the 182-day papers are currently trading at returns of 7.829% and 7.865% respectively.
[Graph in PDF]
Economic Update
The Central Bank monetary policy (MPC) effected an eight consecutive interest rate cut of 25.0bps from 9.50% to 9.25% on 7th October 2025, in an aim to foster economic growth by stimulating commercial lending to the private sector. The past rate cuts have so far witnessed improved private sector credit from a contraction of 2.9% in Jan-2025 to 2.2% in June and 5.0% by end of August 2025.
The favorable credit growth rate for a stable economic growth is projected at above 12.0% with an inflation range of 5±2.5%.
Inflation remains within the above government target range, stabilizing at 4.6% in September and October 2025, supported by food prices on increased supply especially for maize after the October harvest especially from the western part of Kenya.
The interbank rate continues to track the above Central Bank Rate (CBR), declining by 26.6bps between end of September and end of October 2025.
Forex reserves remain stable at USD 12.19Bn, sufficient for 5.3-month of import cover, supported by the October 2025 Eurobond receipts, diaspora remittances and inflows from agricultural exports. All these combined continue backing up the local currency.
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Government Budget Performance
Revenue estimates for the first four months of 2025 hit KES 1,513.11Bn, a 102.4% performance against a four-month KES 1,477.86Bn.
Tax contributed KES 736.28Bn 0r 48.7% of the revenue followed closely by borrowings with KES 730.25Bn or 48.3% of the target revenue for the period. Tax and borrowings contributed 96.9% of the total revenue collected.
Domestic borrowing surpassed the four-month target at 140.4% or KES 513.84Bn as external borrowings also exceeded target at 113.9% or KES 216.40Bn.
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Public Debt
Provisional statistics from the Central Bank of Kenya point Kenya’s debt at KES 11.97 trillion as of end of August 2025, reflecting a 11.5% surge from that of KES 10.73Tr reported similar period in 2024.
Domestic debt rose faster at 18.1% year on year from KES 5.56Tr to KES 6.56Tr while external debt rose at 4.4% from KES 5.18Tr to KES 5.40Tr by end of August 2025.
