The Central Bank of Kenya (CBK) will partially buy back a Sh76.5 billion bond set to mature in May next year as part of initiatives to reduce pressure from domestic debt maturities.
The apex bank has invited holders of the paper to voluntarily participate in the early buyback offer targeting redemptions of Sh30 billion with the auction closing on November 17.
Investors may opt to sell-back part or the entire holding/face value in the bond.
This is the second domestic buyback by CBK after a February redemption of Sh50 billion on three bonds that were due to mature in April and May, easing the headache of heavy payments in the two months from the exchequer.
CBK is expected to foot the buyback bill from proceeds of an auction on re-opened 20- and 15-year bonds that seeks to raise Sh40 billion.
The paper targeted for the early buyback has a coupon or interest charge of 14.2280 percent, signalling lower debt service cost for the government going forward, when contrasted to the lower paying reopened bonds which have coupons of 12 percent (re-opened 20-year) and 13.9420 (re-opened 15-year).
The auction for the re-opened bonds runs until November 5.
The early buyback of the Sh76.5 billion bond was initially targeted for September, according to the National Treasury 2025/26 annual borrowing plan.
Funding for the buyback was also to be made available from proceeds of bonds with tenures of between 10 and 15 years.
The Treasury bond issuance calendar for the 2025/26 fiscal cycle has planned for five additional domestic bond buybacks, including papers valued Sh103.4 billion with an August 2026 maturity and Sh144.5 billion maturing in September 2027.
The National Treasury is expected to deploy a mix of buyback and switch auctions to manage debt service costs.
“The liability management plan via bond buyback and switch auctions on domestic debt will be part of the borrowing strategy in the 2025/26 fiscal year,” the exchequer stated.
“This will be implemented by selecting the optimal mix of instruments to replace maturing bonds with the aim of reducing maturity pressure and smoothening the redemption profile.”
The government says it is fully committed to proactive liability management, leveraging both market and non-market-based operations to reduce debt service costs, mitigate refinancing risks and ensure the stability and sustainability of the public debt portfolio.
A buyback allows the government to purchase its own debt from holders/investors before the maturity date in a move that saves on interest cost by replacing high-interest instruments that will lower paying papers.
Switch bonds on the other hand refer to transactions where an investor or bond holder rolls over their expected final payout to another instrument, mostly one with a longer maturity profile.
Kenya has previously taped switch auctions to move holders of shorter dated Treasury bills into longer-term bonds.
