The Central Bank of Kenya (CBK) has opened a Sh10 billion Treasury bond switch auction that will allow investors holding two existing government securities to exchange part or all of their holdings for a longer-dated bond maturing in May 2033.
The auction, which opened on September 24, 2026, targets investors holding unencumbered positions in Treasury bonds FXD1/2024/003 and FXD2/2013/015. Bids will be accepted until 10 am on October 5, 2026, when the auction will be conducted.
The switch will move investors into Treasury bond FXD1/2018/015, which has about 6.6 years remaining to maturity.
“Participation in the auction is on a voluntary basis, and investors may opt to switch part or the entire holding (face value) in the bond,” CBK said in the prospectus.
The first source bond, FXD1/2024/003, has a coupon rate of 18.3854% and is due to mature on January 11, 2027, leaving investors with a relatively short period before maturity.
The second source bond, FXD2/2013/015, carries a 12% coupon rate and matures on April 10, 2028.
In exchange, investors will receive FXD1/2018/015, which has a coupon rate of 12.65% and matures on May 9, 2033.
The transaction therefore gives eligible investors an opportunity to move from securities with nearer maturity dates into a government bond with a longer remaining term.
CBK will use a multi-price auction, meaning successful bids for the destination bond will be allocated according to the yields quoted by investors.
The prospectus gives dirty prices of 106.7431 for FXD1/2024/003 and 109.1339 for FXD2/2013/015. The destination bond will instead be priced according to the yields submitted by successful bidders.
Investors submitting competitive bids must apply for at least Sh2 million per CSD account per tenor. Non-competitive bids will have a minimum of Sh50,000 and a maximum of Sh50 million.
CBK says only investors with unencumbered holdings in the two source bonds as of October 5 will be eligible to participate.
“Pledge: Investors with outstanding pledges need to cancel them five (5) days before the switch Settlement date to be eligible to participate in the switch auction.”
Successful investors will be able to view their allocations through the DhowCSD Investor Portal or App under the Bids tab on October 5.
Settlement is scheduled for October 7, when investors' portfolios will be updated with the allocated amounts. Any remaining cash below the Sh50,000 minimum investment amount will be refunded.
The destination bond attracts accrued interest of Sh4.9349 for every Sh100.
CBK says withholding tax is calculated on the clean price of the bond. Its official pricing table provides clean prices at different yields, ranging from 112.5698 at a 10% yield to 94.2626 at a 14% yield.
For example, the prospectus says a quoted yield of 12.65% corresponds to a clean price of Sh99.9665. When accrued interest of Sh4.9349 is added, the resulting dirty price is Sh104.9014.
The prospectus also states that the destination bonds may be reopened at a future date. They qualify for statutory liquidity ratio requirements for commercial banks and non-bank financial institutions under the Banking Act.
A Treasury bond switch is a debt-management mechanism that enables the government to alter the maturity profile of outstanding domestic debt by offering holders of existing securities an opportunity to exchange them for another government bond.
In this case, CBK is offering holders of bonds maturing in 2027 and 2028 an opportunity to move into a security maturing in 2033.
Participation is voluntary, and CBK retains discretion over the bids it accepts.
“The Central Bank reserves the right to accept applications in full or part thereof or reject them in total without giving any reason,” the prospectus maintained.
The bonds can also be rediscounted by CBK as a last resort at three percentage points above the prevailing market yield or coupon rate, whichever is higher.
The auction will therefore provide eligible investors with an option to adjust the maturity of their government bond holdings while allowing CBK, acting as fiscal agent for the Republic of Kenya, to manage the government's domestic securities portfolio.