November Primary Pre-auction Note – FXD1/2012/020 & FXD1/2022/015
The Central Bank of Kenya (CBK) re-opened two papers, FXD1/2012/020 & FXD1/2022/015, seeking KES 40 billion from the public for November 2025 budgetary support.
The auction coincides with an improved liquidity environment and a subdued demand for the same from the government. This is confirmed by the low amount on offer for November 2025 primary auction and a scheduled early settlement offer floated for the same month. The BUYBACK offer is set to settle KES 30.00Bn out of the outstanding KES 76.54Bn on 19th November 2025. Further, the buyback pricing for FXD1/2023/003 will be market determined through an auction set for 17th November 2025.
We anticipate an overall oversubscription supported by improved liquidity position with oversubscriptions expected on FXD1/2012/020 (7.0-years) of 12.00% coupon, on high demand for short-term papers. This is as the paper’s tenure is relatively short.
The auction with further benefit from reinvestments of KES 78.28Bn Coupon payouts due for November 2025, out of which KES 54.40Bn coupons are due on this auction’s value date, 10th November 2025. In December 2025 maturities and coupon redemptions stand at KES 72.91Bn with KES 25.20Bn being a bond maturity for FXD2/2010/015.
In view of the above liquidity status and other factors discussed hereafter, we recommend the following rates for your bidding guidance:
[Graph in PDF]
FXD1/2012/20 has a holding of KES 130.81Bn with its coupon of 12.000% being paid in May and November every year. The paper is issued at its clean price since its next coupon will be paid on its value settlement date and is viewed to give the point to an appropriate pricing for any similar paper.
The FXD1/2012/20 was last issued in May 2025 where it was oversubscribed with KES 54.39Bn against a KES 30.00Bn target. Its market weighted average pricing was 13.7334% (yield to maturity (YTM)) while the government accepting bids of 13.6489%.
Since last re-opened, the FXD1/2012/020(7-year) has witnessed three rate cuts, from 10.00% in May 2025 to 9.75% in June 2025, and then to 9.50% in August 2025 and to 9.25% on 7th October 2025.
The FXD1/2022/015 (11.4-years) has been re-opened three times and tapped once for the year 2025, while recording undersubscriptions in both auctions excluding the tap sale. During the recent May 2025 re-opening, the paper was undersubscribed with KES 26.41Bn while the government accepting KES 25.28Bn against a KES 50.00Bn target. Its market average YTM was 13.9417% while accepting a 13.9128% YTM.
FXD1/2022/015 has an outstanding amount of KES 129.19Bn with its 13.942% coupon being paid out in April and October annually.
Government Budget Performance
Revenue estimates for the first quarter of the fiscal year 2025/26 hit KES 1.03 trillion (Tr) to represent a 93.1% performance against budget.
Tax revenue underperformed at 84.3% or KES 553.66Bn in totals for July, August and September 2025 totals. This saw tax revenue account for 53.7% of the total revenue collected.
Total borrowings accounted for KES 444.47Bn or 43.1% of the total revenue collected, with domestic borrowing contributing KES 425.74Bn or 41.3% of the quarter’s revenue collected. External revenue accounted for KES 18.73Bn or 1.8% of the revenue collected.
[Graph in PDF]
Primary Bonds Market Performance
The primary auctions have remained oversubscribed since January 2025, mainly supported by re-investments from both the maturing bonds and coupon payouts.
October 2025 coupon payouts stood at KES 48.155Bn as we project for KES 78.30Bn in November and KES 72.90Bn in December 2025. October 2025 primary auction was oversubscribed with a total of KES 118.89Bn with the government accepting KES 85.27Bn to represent a 170.5% performance.
In this auction we expect oversubscriptions to persist supported by the above KES 72.90Bn coupon payouts for due in the month. Out of this, KES 48.96Bn coupons will be paid out on 10th November 2025.
[Graph in PDF]
Secondary Bonds Market Performance
Secondary bond trading activity has been quite active with October recording a 15.5% decline from KES 226.40Bn to KES 193.47Bn impacted by the primary auctions.
The on the run papers continue to rally the market with FXD1/2021/20 re-opened in October , FXD1/2022/15 re-opened in September and IFB1/2022/19 re-opened in August 2025 occupying the top three movers’ list as shown in the table below.
In November 2025 we anticipate the same movement as the primary investors are expected to offload their papers immediately after the auction to cash in on early capital gains.
[Graph in PDF]
Yield Curve
The yield curve shifted upwards in October 2025 dictated by low demand in the primary to force the rates upwards. This was further informed by a tactical move by investors to push yields higher which will influence the primary auction pricing for better discounts.
The 7-year paper curve shifted up 40.2bps while yields on the 9-year, 10-year and 11-year papers widened up faster at 56.8bps, 65.7bps and 48.2bps up. Yields on the 14-year paper all the way to a 19-year paper shifted up even faster between 48.4bps and 64.3bps.
As such, we expect market average of above 40.0bps above the market averages for the issued papers.
[Graph in PDF]
Treasury Bills
Narrowing interest rates 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.
