2025 was characterized by heavy front loading of domestic borrowing through bond reopenings, alongside strategic access to international capital markets to manage refinancing risks, support budgetary needs, and smoothen debt maturities.
Treasury Bills
The Treasury Bill (T-Bill) market experienced a significant transformation in early 2025. The most notable change was the discontinuation of the 364-day T-Bill, reducing the number of money market instruments from three (91, 182, 364-day) to just the 91-day and 182-day tenors. This decision was designed to reduce the frequency of short-term debt repayments. Previously, the high volume of maturing 364-day T-Bills placed considerable pressure on the government to continually refinance principal and interest payments. To alleviate this strain and promote greater fiscal stability, the government shifted toward issuing medium-term bonds with maturities of 2 -3 years. This transition to longer-term instruments is expected to lower borrowing costs and enhance the overall effectiveness of debt management.
Regarding performance, Treasury Bill rates, which had surged to nearly 17% in 2024, declined sharply throughout 2025. This significant drop was largely a result of the Central Bank of Kenya’s ongoing reductions to the Central Bank Rate (CBR) as inflation dipped below 5%. Despite decreasing yields, demand remained robust with auctions regularly oversubscribed, often exceeding 150%, especially for the 91-day bill. Both banks and retail investors were drawn to these ‘safe haven’ assets amid the downward trend in interest rates.
Below is the aggregate performance of T-Bills in 2025.
| Tenor | Early 2025 Yield | End of 2025 Yield | Approx. Avg. Return (2025) |
| 91-Day Bill | 9.53% | 7.73% | 8.60% |
| 182-Day Bill | 10.03% | 7.80% | 8.90% |
| 364-Day Bill* | 11.30% | 9.21% | 10.20% |
Government Bonds
The Government transitioned from a period of high interest “emergency” borrowing toward a strategy of fiscal consolidation. Through a combination of Eurobond refinancing and domestic Treasury bond auctions, the government successfully managed its debt profile amidst a strengthening Kenya Shilling and falling inflation.
Eurobond Issuances in 2025
In 2025, the government issued three separate tranches of Eurobonds to address upcoming debt maturities scheduled for 2027 and 2028. This strategic move aimed to efficiently manage the country’s external obligations and optimize its debt profile.
Through these issuances, the government successfully raised a total of $3 billion. The average coupon rate for these Eurobonds was 8.73%, representing a notable reduction compared to the previous year’s average rate of 10.37% in 2024. This decrease in coupon rates highlights improved borrowing conditions and reflects a more favorable financial environment for the government.
| Issue Date | Tenor | Amount Raised | Coupon Rate |
| Feb 2025 | 11 Year | $1.5 Billion | 9.50% |
| Oct 2025 | 7 Year | $750 Million | 7.88% |
| Oct 2025 | 12 Year | $750 Million | 8.80% |
Domestic Debt – Treasury Bonds
Domestic borrowing in 2025 was dominated by reopened Treasury bonds rather than entirely new issuances. This approach allowed the government to extend debt maturities while benefiting from strong demand from local institutional and retail investors.
As a result of these operations, the domestic debt market successfully raised approximately KSh. 543 billion during this period.
Key Bond Auction Results -2025
| Auction Month | Bond Name | Original Tenor | Coupon Rate | Average Yield |
| April 2025 | FXD1/2020/015 | 15-Year | 12.76% | 13.67% |
| Aug 2025 | IFB1/2023/6.5* | 6.5-Year | 17.93% | 17.70% |
| Sep 2025 | FXD1/2018/020 | 20-Year | 13.20% | 13.20% |
| Nov 2025 | FXD3/2019/015 | 15-Year | 12.34% | 12.34% |
| Dec 2025 | FXD1/2021/025 | 25-Year | 13.92% | 13.92% |
Infrastructure Bond is tax free
In November 2025, the government initiated a buyback of the FXD1/2023/003, a 3-year bond. This strategic move aimed to reduce the repayment burden that was scheduled for early 2026. By repurchasing this bond ahead of its maturity, the government sought to ease short-term fiscal pressure and manage its debt obligations more effectively.
Following the buyback, in December 2025, the government extended an invitation to investors holding the maturing FXD1/2016/010, a 10-year bond set to mature in January 2026. Investors were offered the opportunity to ‘switch’ their holdings into the FXD1/2022/015, a 15-year bond. This operation allowed investors to roll over their investments, effectively extending the maturity by approximately 11 years. The switch helped the government spread its debt repayments over a longer period and provided investors with an alternative long-term investment.
In 2025, interest rates went down thanks to three key factors: the Central Bank lowered its rate to 8.75%, the Shilling stayed stable at about 129 KES/USD, and inflation averaged 4.4%, remaining within target. These measures helped keep borrowing affordable and supported a stable economy.
