Interbank Activity Slows As Treasury Market Sees Renewed Investor Appetite

Interbank lending contracted during the week, with the average traded volumes inching 55.4% w/w lower to KES 7.1bn, from KES 15.91bn the prior week.

In addition, the number of interbank deals reduced by 36.0% w/w. The Kenya Shilling Overnight Interbank Average (KESONIA) tapered by 23.04bps w/w to an average of 9.24% as market players continued to price in the recent 25bps CBR rate cut. Notably, no actor utilized the CBK borrowing window in the week.

Demand for Treasury bills improved in the week ended 16th October 2025, with overall subscription rising to 114.7% from 106.9% in the previous week. Investors submitted bids worth KES 27.30bn, of which the fiscal agent accepted 99.1%. This quantum was slightly below the value of maturities, resulting in a net repayment of KES 0.6bn.

In line with recent trends, the 364-day paper led the performance, posting a subscription rate of 213.5% (higher than the 192.0% recorded in the week prior). The 91-day paper followed, with its subscription rate at 91.0% vs 90.0% in the week prior, while the 182-day paper garnered a much lower subscription rate of 25.5% vs 85.5%.

The weighted average rates on accepted bids declined in the week, with the 91-day, 182-day, and 364-day rates narrowing by 3.20bps w/w, 2.10bps w/w, and 2.56bps w/w to 7.8591%, 7.9091% and 9.3648%, respectively.

In the primary bond market, the October bond issuance successfully raised KES 85.27bn through the reopening of FXD1/2018/015 and FXD1/2021/020. Notably, the government decided to absorb more funds, given that the fiscal agent is slightly ahead of the borrowing curve (c.107.5%). Investor appetite was strong, further supported by ample liquidity, with total bids amounting to KES 118.89bn, more than double the offered amount.

As expected, FXD1/2021/020 attracted the most interest, signaling investor preference for higher returns despite a longer duration, given the falling interest rates in the market. The weighted average rate of accepted bids stood at 12.65% for FXD1/2018/015, slightly lower than our expected outcome range, and 13.53% for FXD1/2021/020, landing at the upper bound of our projection.

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