The Central Bank of Kenya has opened a KSh150 billion sale involving three reopened infrastructure Treasury bonds. The offer gives investors a choice of securities with 9.3, 12.7 and 16.2 years remaining to maturity, fixed coupons ranging from 11.7500% to 12.7370%, and no withholding tax.
Subscriptions opened on July 30 and close at 10:00 a.m. on August 12, 2026. The auction will take place on the same day, with successful investors expected to settle their purchases on August 17.
Key Overview
- Amount offered: KSh150 billion
- Bonds: IFB1/2019/016, IFB1/2021/018 and IFB1/2021/021
- Remaining maturities: 9.3 years, 12.7 years and 16.2 years
- Coupon rates: 11.7500%, 12.6670% and 12.7370%
- Withholding tax: Not applicable
- Minimum non-competitive bid: KSh50,000
- Minimum competitive bid: KSh2 million per CSD account per tenor
- Auction date: August 12, 2026
- Settlement date: August 17, 2026
Three Reopened Bonds Target Infrastructure Funding
According to the official August bond prospectus, the securities are being offered to fund infrastructure projects. Because they are reopenings, investors are buying additional units of bonds that already exist rather than subscribing to entirely new issues.
IFB1/2019/016 carries an 11.7500% coupon and matures on October 8, 2035. IFB1/2021/018 pays 12.6670% and matures on March 21, 2039, while IFB1/2021/021 offers 12.7370% and matures on August 18, 2042.
The offer gives investors exposure to different points on the long-term government yield curve. However, the coupon rate should not be confused with the investor’s final yield. The yield will depend on the accepted auction rate and the price paid for the bond.
Tax Exemption Strengthens the Income Proposition
The three infrastructure bonds do not attract withholding tax, allowing investors to receive their coupon income without the deduction normally applied to many conventional Treasury bonds.
This feature can make infrastructure bonds particularly attractive to income-focused investors. The actual return must still be assessed against the purchase price, inflation, alternative investments and the risk that market interest rates may change after the auction.
Coupon payments will be made twice a year until the respective amortisation and maturity dates. Because the securities have fixed coupons, the cash income is predictable, although their secondary-market prices may rise or fall as prevailing yields change.
Entry Limits and Auction Process
Non-competitive bids begin at KSh50,000 and are capped at KSh50 million. These investors do not specify their preferred yield and instead accept the weighted average rate determined through the competitive auction.
Competitive investors must submit at least KSh2 million per Central Securities Depository account for each tenor and state the yield they are willing to accept. CBK may accept applications fully, accept them partially or reject them.
Successful bidders are expected to obtain their payment keys and payable amounts through the DhowCSD Investor Portal or app on August 14. Failure to settle may lead to suspension from subsequent government-securities investments.
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Accrued Interest Raises the Settlement Cost
Since these are reopened bonds, buyers must compensate existing holders for coupon interest accumulated since the previous payment date. This accrued interest is added to the clean bond price to determine the dirty price paid at settlement.
The accrued interest amounts are KSh3.8413, KSh4.6283 and KSh5.6337 per KSh100 of face value for the three bonds respectively. At yields matching their coupon rates, the prospectus indicates dirty prices of approximately KSh103.8033, KSh104.5899 and KSh105.6134 per KSh100.
Investors should therefore budget for a settlement amount that may be above the face value of their successful allocation. The higher payment does not represent an additional fee; part of it reflects interest already earned during the current coupon period.
Amortisation Changes the Repayment Profile
Each bond has a 50% amortisation feature, meaning half of the outstanding principal will be repaid before final maturity. IFB1/2021/018 will make its partial repayment on April 1, 2030, followed by IFB1/2019/016 on October 14, 2030 and IFB1/2021/021 on September 1, 2031.
The remaining principal will continue earning coupons until the final maturity date. Investors should account for this structure when projecting future income because coupon payments will decline after half of the principal has been repaid.
The bonds will be listed on the Nairobi Securities Exchange, and secondary trading in multiples of KSh50,000 is scheduled to begin on August 17. Investors may also pledge the securities as collateral when borrowing from regulated financial institutions.
Separate Switch Auction Supports Debt Management
Alongside the infrastructure-bond offer, CBK is conducting a separate KSh15 billion Treasury switch auction. According to an independent report on the two transactions, eligible holders of selected Treasury bills and the FXD1/2012/015 bond may exchange their securities for FXD4/2019/010.
The voluntary switch runs from July 30 to August 24 and is being conducted on a multi-price basis. Such transactions allow the government to replace securities approaching redemption with longer-dated debt, helping to manage near-term refinancing obligations.
Sources: Central Bank of Kenya / People Daily
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