The heavy uptake of Treasury bills – short term securities – has cut the average time to maturity of the overall domestic debt to signal building pressure on the State from upcoming redemptions.
Data from the Central Bank of Kenya (CBK) shows the average time to maturity for issued local securities including Treasury bills and bonds fell to 7.4 years in June 2025 from a slightly higher 7.5 years in June 2024.
CBK notes that the increase in the T-bill stock has been largely influenced by investor appetite for the one-year paper as they seek to lock in returns in a decreasing interest rate environment.
“The readjustment in the interest rate increases the propensity of investors to invest in shorter dated bonds. The issuance of shorter dated instruments reduced average time to maturity,” the apex bank said in a recent report.
“The increase in T-bills stock was partly driven by investor preference for the longer 364 days T-bill as investors sought to lock in interest rates in a decreasing interest rates environment.”
The ratio of Treasury bills to bonds rose from 12:88 in December 2024 to 17:83 in June 2025 mirroring an increase in Treasury bills in the portfolio of government securities.
Investors largely favoured investing in Treasury bills during the period of rising interest rates to avoid locking away funds for longer at a lower return resulting in the bloat in the stock of short-term papers.
The government was equally unwilling to offer higher returns on longer-dated papers in a move to avoid outsized payments for longer, exacerbating a yield curve inversion where returns of shorter dated instruments outpaced those of long term bonds.
Long-term papers typically have the highest return on average to accommodate investor duration risks.
The National Treasury is now leaning on re-opened bonds to push investors into accepting long term papers while retaining control on interest rates.
The recently published bond issuance calendar for the 2025/26 fiscal year shows that the government intends to reopen at least 36 individual bonds in 12 months to June 2026 while issuing just one new paper --a 25-year bond in May next year.
“Under the benchmark bond programme, fixed-rate bonds with maturities of two, five, 10, 15 and 25 years will be issued, complemented by infrastructure bonds to strengthen domestic financing,” the National Treasury said in its borrowing plan.
Under re-opened bonds, CBK offers investors a one-time price discount where the coupon is lower than yield, they are willing to lend at.
This arrangement helps compensate investors while shielding the government from exposure to higher payouts from elevated interest rates.
Treasury bills tallied to Sh1.05 trillion of total domestic debt as of last week and made-up 16.49 percent of issued securities.
Meanwhile, Treasury bonds totalled Sh5.3 trillion and represented 83.51 percent of issued securities.
Total domestic debt stood at Sh6.56 trillion and included Sh31.7 billion from a CBK overdraft.
