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The Central Bank of Kenya (CBK) has reopened two Treasury bonds to raise KSh50bn for the government, giving savers a fresh chance to lock in coupons of 12.34% and 12.5% a year. The sale opened on October 23 and bids close on Wednesday, November 4.
Both papers are reopenings, meaning they already exist and investors are buying more of the same bond, often at a price above or below face value depending on the yield they bid.
The two bonds on offer
- FXD3/2019/015: a 15-year bond with about 7.8 years left to run, maturing on July 10, 2034. Coupon 12.34%. The next interest payments fall on January 18 and July 19, 2027.
- FXD1/2026/030: a 30-year bond with about 29.5 years left, maturing on March 13, 2056. Coupon 12.5%. First payments are due on April 19 and October 18, 2027.
Interest on both is taxed at a 10% withholding rate, so the 12.5% coupon pays about 11.25% after tax on face value. The actual return depends on the price paid at auction.
How to bid
Investors need an active account on CBK’s DhowCSD platform, which can be opened online or through the DhowCSD app. Non-competitive bids, where you accept the average rate the auction sets, must be between KSh50,000 and KSh50m. Competitive bids, where you name the yield you want, start at KSh2m per account for each bond.
The auction runs on a multi-price basis, so successful competitive bidders may each get a different yield. CBK can accept bids in full or in part, allocate on a pro-rata basis, or reject them. Successful bidders will find their payment key and amount on the DhowCSD portal on Friday, November 6, and settlement is due by Monday, November 9. Secondary trading on the Nairobi Securities Exchange starts the same day in multiples of KSh50,000.
Why the 30-year bond matters
The government has leaned on long-dated paper this year. When the same 30-year bond was last on offer alongside SDB1/2011/030, the auction drew KSh83.83bn in bids against KSh50bn offered, and CBK accepted KSh33.88bn of the 30-year paper at a weighted average yield of 14.18%, according to I&M Capital’s market note. That yield is well above the 12.5% coupon, which is why such bonds often sell below face value.
Short-term rates are much lower. At this week’s Treasury bill auction the 91-day bill averaged 8.748% and the 364-day 9.027%, so the bonds pay more in exchange for locking money away for years and taking on price risk if rates rise.
Before bidding, it helps to compare the options. Our Treasury bills vs bonds guide explains how each works, and our money market fund comparison covers what you give up in access when you buy government paper.
Who these bonds suit
The 15-year bond suits savers who want a steady income for the next seven to eight years, for example to cover school fees or top up retirement income. The 30-year bond is mostly bought by pension funds and insurers, which need long-dated assets to match what they will owe members decades from now. Individuals can buy it too, but should be ready to hold or to accept a lower price if they sell early when rates are higher. Neither bond is tax-free, unlike infrastructure bonds, so compare after-tax returns before deciding. Anyone bidding for the first time should open the DhowCSD account well before November 4, because verification can take a few days.
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