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Equities Market
Stock prices closed higher in the third quarter of 2025 (Q3-2025), expanding by 15.2% quarter on quarter (Q-Q) in relation to those traded end of June 2025. The prices were supported by the continued interest rate cuts and expectations of better returns for full year 2024 (FY2025). AS such, NSE 20 companies gained the most at 21.8%, followed by NSE 10 and NSE 25 with 17.6% and 17.4%, respectively.
On sectoral price performance, major gains were noted on the automobiles, investment services and the agriculture sectors, see page 2 for more. Year to date, stock prices were up 41.0% while expanding 65.1% on average in the last one year.
Market turnover accelerated up 65.8% from KES 29.75Bn in Q2-2025 to KES 49.33Bn in Q2-2025 partly supported by rise in volumes traded from 1.44Bn to 1.82Bn shares and the price expansions. The value includes exchange traded funds and the real estate units traded.
Market foreign participation declined from 45.9% to 27.8% on average with a surge in net foreign sales resulting in a spike in net foreign outflows from KES 176.57Mn to KES 4,088.68Mn. Heavy foreign outflows were spotted on Safaricom and KCB Group.
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Market attention remained on the Banking and telecommunication sectors which transacted KES 24.83Bn or 53.8% and KES 13.75Bn or 29.8% of the market value, cumulating to KES 38.58Bn or 83.5% of the total market turnover. The two sectors account for 59.7% of the volumes transacted.
Banks were supported by better earnings for Q2-2025 reported in August 2025 signaling better results in FY2025. Safaricom was rallied by a better outlook on Safaricom Ethiopia which reported over 10.10 million active subscribers in its first quarter of the financial year ending 31st March 2025.
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Safaricom emerged the quarter’s top mover after changing hands 484.67Mn shares valued at KES 14.15Bn with 50.0% foreign participation. The counter recorded the highest net foreign outflows of KES 2.15Bn, on heavy foreign sales of KES 8.16Bn or 57.7% of all its sales transactions compared KES 6.00Bn or 42.3% of all its buy transactions. This saw its price up 15.6% Q-Q from KES 25.00 to KES 28.90 per share.
Issuance of a special and interim dividend of KES 4.00 saw increased attention on KCB Group to emerge in top second mover position with KES 3.98Bn turnover from 213.59Mn shares. This further resulted to a 21.8% rise in its share price from KES 46.60 to KES 56.75 per share supported by improved share valuation which hit KES 60.06 per share.
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Secondary Bonds Market Performance
Secondary bond trading remained active in the quarter to transact a total of KES 652.06Bn, 2.6% higher in relation to KES 621.68Bn exchanged in Q2-2025. Year on year the value traded improved 40.9% from that of KES 389.28Bn traded in Q3-2024.
The three quarters of 2025 transacted a total of KES 1,941.68Bn, 67.8% from that of KES 1,157.37Bn traded similar period in 2024. Market focus remained on infrastructure bond papers (IFBs) which moved KES 385.52Bn to account for 59.1% of the quarter’s turnovers supported by August’s re-opened IFBs.
August’s re-opened IFB1/2022/19 emerged the quarter’s top mover with KES 92.62Bn despite its yield to maturity (YTM) rising from 12.4608% to 13.1176%. Compared to the primary’s accepted YTM, the bond’s YTM dropped 85.2bps while investors from the primary auction cashed in.
Month on month performance saw a fair distribution of value traded across the three months with a slightly higher value traded in July and August 2025, find second table below.
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Primary Bonds Market Performance
Quarterly primary auctions were heavy oversubscribed at 285.2% of KES 713.15Bn while the government accepting KES 405.28Bn or 56.8% of the offered amount, representing 162.1% performance against the offered amount.
The performance was supported by KES 293.38Bn coupon and maturities paid out in the quarter and reallocation of funds from other low paying instruments following the interest rate cuts following issuance of infrastructure bond papers.
In Q4 2025, we expect total payouts of KES 199.34Bn from bonds out of which KES 25.20BN are maturities and KES 174.14BN are coupon payouts.
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Yield Curve
Continued interest rate cuts saw the yield curve shift down further in nearly a balanced manner across the curve right from the short-end to the long-end. The downshift was further influenced by improved liquidity in the market supported by government payouts and the economy as a whole.
Year on year, the yield curve shifted down faster occasioned by a 325.0bps decline in the Central Bank Rate (CBR) from 12.75% in September 2024 to 9.50% by end of September 2025. The short-end widened faster following heavy demand in the section as government focus remained on long-term papers.
In the last quarter of 2025, we expect a further downward shift of the yield curve, however, at a much lower pace as interest rates almost hit their base levels. We forecast the base lending rate to settle at 7.0% a level last seen as appropriate for financing businesses for a long time.
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Money Market
CBK & Inflation
During the quarter, the Central Bank effected a seventh consecutive rate cut of 25.0bps from 9.75% to 9.50% in August in what the Banking regulator alluded to pumping credit to the private sector. Cumulatively, the benchmark lending rate dropped by 350.0bps from a high of 13.0% recorded between February and August 2024.
Private sector credit growth rose by 3.3% in both July and August while accelerating at 5.0% in September compared to contractions of 2.9% and 1.3% in January and February 2025.
In the quarter, average inflation stood at 4.4% in relation to an average of 3.9% recorded in Q2 2025 and 4.1% of Q3-2024. Quarter on quarter, inflation rose to 4.6% in September in relation that of 3.8% of June 2025 and 3.6% of September 2024. The rise in inflation was largely influenced by surge on certain foods items. Prices of sugar surges 20.4% while that on maize flour expanded by 17.0%. We however expect the prices of maize flour to turn down as supply increases from the ongoing harvest in the Western part of Kenya.
- We forecast a marginal decline in inflation in the month of October supported by increased food supply especially of maize items. This will be supported by expected supply of vegetables which will benefit from the short-term rains of between October and December 2025.
- Low inflation will also benefit from the low international oil prices brought down by increased production and supply especially by the OPEC+ countries.
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Interbank
Interbank rate remained anchored within the Central Bank rate, closely mirroring the CBR to close the quarter at 9.51% down from 9.71% in Jun-2025 and from 12.80% recorded by end of September 2025.
This was driven down by the ongoing interest rate cuts and the general rise in liquidity in the market witnessed in the market during the quarter.
The above rise in liquidity saw average liquidity demand dip from KES 23.50Bn in Q2-2025 to KES 12.44Bn by end of Q3-2025.
Bank excess liquidity remained quite low during the quarter at KES 2.40Bn by end of Q3-2025, but higher compared to KES 0.50Bnm of end of June 2025. The reserves were largely impacted by primary bond settlements.
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Treasury Bills
A total of KES 345.11Bn was subscribed or 110.6% against a quarterly target of KES312.00Bn, while the government accepting KES 308.91Bn to account for 99.0% performance against a target.
The performance was supported by reinvestments from the KES 292.85Bn that matured in the quarter. In Q4-2025, we expect oversubscriptions to remain present supported by re-investments from the KES 396.08Bn maturities.
Return on investments across the three papers dropped further in the quarter, shedding 22.4bps, 47.8bps and 18.9bps to 7.9143%, 7.9851% and 9.533% on the 91-, 182- and 364-day papers respectively.
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Currency
The shilling remained stable trading at an average of KES 129.24 per US dollar strongly supported by sufficient forex reserves.
Forex reserves remained largely stable averaging at USD 19.93Bn, sufficient for 4.8-months of import cover. These largely benefitted from diaspora remittances and export receipts especially from tea and horticultural crops which offset imports.
Quarterly diaspora remittances dropped 2.3% to USD 1.26Bn in Q3-3035 from that of USD 1.29Bn recorded in Q2-2025. In the nine months of the year, total remittances rose 3.7% from USD 3.64Bn to USD 3.77Bn.
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Public Debt
Provisional statistics place public debt at KES11.81 trillion as of June 2025, a 11.8% year on year higher compared to KES 10.56Tr of June 2024. Domestic Debt takes the lead with KES 6.33Bn or 53.6% of the total debt.
