Institutional investors and fund managers have invested a record Sh1 trillion in seven government bond auctions over four months, highlighting the growing preference for safer investments over starting or expanding businesses in Kenya.
Data from the Central Bank of Kenya (CBK) shows that bids submitted since July exceeded Sh1 trillion, more than double the Sh480 billion the government had targeted through the bond sales. The CBK accepted Sh654 billion from the bids, helping the government meet 65.1 percent of its net domestic borrowing target for the 2026/27 financial year.
The strong demand reflects the continued appetite for fixed-income investments among commercial banks, insurance companies, pension funds and individual households, even as domestic interest rates decline.
“The domestic market continues to support the growing budgetary financing requirements,” said CBK Governor Kamau Thugge. Thugge told the National Assembly Finance and National Planning Committee that the domestic market continues to support the government’s growing financing needs.
The government received its biggest response in August when three reopened infrastructure bonds attracted bids worth Sh460.3 billion against a target of Sh150 billion. The bonds raised Sh312 billion, representing a performance rate of 307 percent. Their tax-free interest payments have made infrastructure bonds particularly attractive to investors.
All seven bond auctions conducted during the four-month period attracted bids above their targets. The CBK also extended the maturity of Sh49.6 billion in government debt through four bond-switch transactions, exceeding its Sh45 billion target.
The growing investment in government securities comes at a time when many businesses and startups are struggling to survive, raising concerns about the amount of private capital going into investments that could create jobs and increase economic productivity.
As of October 23, government bonds accounted for 83.21 percent of Kenya’s Sh7.88 trillion domestic debt, while Treasury bills represented 15.53 percent. Financial institutions held 80 percent of the domestic debt, with households accounting for 6.16 percent.
Investors have also accumulated close to Sh1 trillion in collective investment schemes, including money market and fixed-income funds.
However, rising inflation could affect future investment decisions by pushing interest rates higher and making shorter-term Treasury bills more attractive. Analysts at AXYS Investment Bank expect the 91-day Treasury bill to remain popular as investors prioritise access to their money amid uncertainty over energy and food prices.