The government has returned to the market for new borrowing worth Sh60 billion via three reopened Treasury bonds, a week after netting Sh179.8 billion from a tap sale of an infrastructure bond issuance.
If fully subscribed, the September bond sale will likely push the Treasury past Sh300 billion in net domestic borrowing less than three months into the current fiscal year, signaling efforts to front-load on local debt at the current friendlier interest rates.
Net domestic borrowing position was boosted by August’s oversubscribed infrastructure bond issuance, which raised Sh95 billion from its primary sale and a further Sh179.8 billion from a subsequent tap sale.
Bond maturities in the month stood at Sh94.6 billion, resulting in new borrowing of Sh180.2 billion for the issuance.
This boosted the overall net domestic borrowing for the current year to about Sh260 billion, which is equivalent to 41 percent of the full-year total target of Sh635.5 billion.
With bond maturities for September standing at Sh16 billion—from a 12-year infrastructure bond floated in August 2013— the new sale offers a window for the Treasury to boost its net borrowing for the year, amid a highly liquid money market that supports large ticket bond sales.
“Following the over-performance observed in last week’s infrastructure bond tap sale, we foresee limited strain on local deficit financing in the near-term,” said analysts at NCBA in a fixed income note.
“However, sustained momentum on tax collections and external financing remains critical for this assumption to hold, given that 91 percent of the July revenue was consumed by recurrent spending and public debt service, curbing any spending on development and counties,” it added.
In the September bond prospectus issued yesterday (Tuesday), the Central Bank of Kenya (CBK) said it is reopening a 30-year bond first sold in 2011, a 25-year bond whose initial sale was in 2022, and a 20-year paper first issued in 2020.
The 30-year bond, which is dubbed a Savings and Development Bond (SDB), will be on sale until September 3, and carries a coupon (interest rate) of 12 percent. The paper is targeting Sh20 billion and has 15.5 years to maturity.
The other two bonds, which are targeting a combined Sh40 billion, will be on sale until September 17. The 25-year paper has a coupon of 14.18 percent and 22.2 years to maturity, while the 20-year has a coupon of 13.2 percent and 12.5 years to maturity.
The relatively high target on the papers despite the Treasury running ahead of target indicates that the government is keen to lock up as much funding as possible early in case of an upward revision to the Sh635.5 billion domestic borrowing target.
The government has fallen into a cycle of revisions of its borrowing targets through supplementary budgets due to revenue collection underperformance and increases in expenditure.
In the previous 2024/2025 fiscal year, the budget statement had set the deficit at Sh597 billion, which was to be financed through domestic borrowing of Sh263.2 billion, and external funding worth Sh333.8 billion.
Three revisions through supplementary budgets followed, eventually settling at a fiscal deficit of Sh997.5 billion in the Supplementary III Budget of June 2025, with net domestic borrowing set at Sh815.6 billion—three times the original projection.
