The Central Bank of Kenya (CBK) has announced a KSh30 billion Treasury bond buyback auction, targeting investors holding the FXD1/2023/003 issue. The move is part of the government’s proactive debt management strategy aimed at smoothing upcoming domestic maturities and easing refinancing pressures.
According to the prospectus released by CBK on Wednesday, the auction will run from October 23 to November 17, 2025, with results announced the same day. Investors will receive payments on November 19, 2025.
Participation is voluntary and restricted to holders of unencumbered positions in the specified bond as of November 17. Eligible investors may sell back part or all of their holdings to the government through CBK’s DhowCSD platform.
The targeted bond, FXD1/2023/003, carries a coupon rate of 14.228 percent and is due for redemption on May 11, 2026. The bond has a remaining tenor of about 0.6 years and an outstanding value of KSh76.5 billion, according to the central bank’s disclosure.
A Tool for Debt Refinancing and Liquidity Management
This is the third buyback operation launched by CBK since the Treasury began actively managing its domestic debt profile to reduce rollover risks. Analysts say such buybacks are key to ensuring liquidity within the domestic debt market while supporting fiscal sustainability.
A senior fixed-income analyst at a Nairobi investment bank, speaking to BusinessRadar Kenya, said the auction “allows the government to repurchase short-term obligations using available cash balances or proceeds from longer-term issuances, which helps extend the average maturity profile of domestic debt.”
The bond buyback also gives investors flexibility to unlock liquidity ahead of maturity, particularly institutional holders such as pension funds and insurance firms that may wish to rebalance portfolios before year-end.
Details of the Buyback Auction
CBK stated that both competitive and non-competitive bids will be accepted.
- Non-competitive bids must be at least KSh50,000 and may not exceed KSh50 million.
- Competitive bids require a minimum of KSh2 million per CSD account per tenor.
The auction will be conducted on a multi-price bid basis, meaning successful bids will be accepted at different prices rather than a single clearing yield.
Investors have been urged to use the bond calculator on CBK’s website to estimate indicative pricing. The prospectus provides a detailed yield-to-maturity (YTM) table, showing corresponding clean prices ranging from KSh101.45 at a yield of 11.0% to KSh103.02 at a yield of 7.625%.
All bid submissions must be made electronically through the DhowCSD Investor Portal or App no later than 10:00 a.m. on November 17, 2025. Results will be accessible under the “Transactions” tab the same day.
CBK emphasized that it reserves the right to accept applications in full, in part, or reject them entirely without providing reasons — a standard clause in Kenya’s domestic securities operations.
Pledge and Settlement Requirements
The central bank has directed that borrowers with pledged holdings on the bond must cancel those contracts at least five days before the buyback value date to be eligible to participate. Settlement for all successful bids will take place on Wednesday, November 19, 2025.
Payments will be made directly into the investors’ linked settlement accounts via CBK’s Central Securities Depository system.
Context: Debt Market Dynamics
The buyback comes at a time when Kenya’s domestic debt market has seen robust investor participation, especially in short- and medium-term bonds, even as the government works to reduce near-term redemption pressure.
As of mid-October 2025, CBK data indicated that outstanding domestic debt stood at approximately KSh5.4 trillion, with a significant portion due within the next 18 months.
“CBK’s decision to conduct another buyback reflects a shift toward more active debt portfolio management, aligning with global best practices,” said a Nairobi-based economist. “It’s also a signal that the Treasury is confident in its cash position and market stability going into the last quarter of the year.”
Kenya has previously carried out limited buyback operations, mostly targeting short-dated infrastructure or fixed-rate bonds nearing maturity. By repurchasing these securities early, the government reduces the risk of large, concentrated repayments that could pressure its cash flows or distort the market.
Implications for Investors
Analysts note that the buyback provides an opportunity for investors to realize gains, especially those who bought into the bond when yields were higher. With market yields trending lower in recent months, prices of outstanding bonds have appreciated, potentially offering investors a favorable exit point.
For those holding until maturity, the move could have minimal impact beyond improving secondary market liquidity and signaling government readiness to manage its obligations responsibly.
Institutional investors, including pension schemes, banks, and insurance firms, remain the dominant holders of government securities, accounting for more than 80% of total domestic debt exposure.
Market Outlook
The buyback announcement also coincides with a gradual moderation in inflation and interest rate expectations. With inflation easing below 6% and the shilling showing signs of stabilization, fixed-income markets have remained attractive for long-term investors.
CBK’s continued transparency in conducting open-market operations, analysts say, enhances investor confidence and underlines the credibility of Kenya’s domestic borrowing framework.
As the November auction approaches, investors will be watching for pricing cues and potential follow-up operations targeting other short-dated maturities.
