Editor’s note: This is general educational information about how Kenya’s Treasury bond auctions are run and how the published results should be read, drawn from the Central Bank of Kenya’s own rules and result sheets listed at the end. It is not investment advice.
The phrase most often quoted from a Kenyan bond auction, the market weighted average rate, is not the rate most successful bidders receive. Nor is it, for competitive bidders, the rate any of them pays. Kenya runs its government bond auctions on a method that prices each accepted competitive bid separately, and the two averages the Central Bank publishes describe different populations. Reading a result sheet without that distinction produces a confident but wrong account of what the auction did.
The legal chain and the mechanics of a bid
The issuer is the National Treasury, not the central bank. Under the Public Finance Management Act, 2012, the Public Debt Management Office is the principal in the issuance of government debt securities on behalf of the National Treasury, and section 53 (8) © provides that securities are issued by the Central Bank of Kenya as a borrowing agent appointed by the Cabinet Secretary. Section 44 of the Central Bank of Kenya Act authorises the Bank to act as fiscal agent and banker to the Government, and section 45 © assigns it the administration of public debt, including issuance, payment of a return and redemption. An agency agreement between the two institutions implements the arrangement. The Treasury approves the auctions and, in close consultation with the Bank, approves cut off rates; the Bank runs the auction, publishes the results and prepares the prospectuses, and facilitates listing at the Nairobi Securities Exchange.
Participation requires an active CSD account at the central bank, which may be opened directly with the Bank at no fee or through an authorised custodial institution, including commercial banks and investment banks, which may charge a maintenance fee. Bonds are issued with maturities of between 2 and 30 years on a monthly basis. Bids from commercial and investment banks go through the DhowCSD graphical user interface; retail bids go through the DhowCSD investor portal or Treasury Mobile Direct. On the retail bid form, a competitive bidder fills in a face value amount and a desired rate in the yield field; a non-competitive bidder fills in the amount only.
Settlement is tightly scheduled. Payment for successful bids is due by 2pm on the settlement date, the Monday immediately after the auction date, or the following business day if that Monday is a public holiday. Investors with maturities falling on the same settlement date can activate a netting flag so that a coupon payment or redemption is offset against the amount owed, with any refund or top up applied. An investor who does not honour payment for a successful bid is barred from investing in government securities for a period prescribed by the Bank.
Multiple price, not uniform price
The allotment rule is stated plainly in the Bank’s auction rules and it is the single most misreported feature of this market. The method used to conduct auctions is the multiple price method, defined in the same document as an auction in which each successful bidder pays the price or rate at which they bid. Competitive bids are ranked by yield from lowest to highest. The weighted average interest rate of competitive bids is computed and the consideration reports go to the Auction Management Committee, which determines the cut off rate and the amount to be accepted.
Allotment then follows three lines. Competitive bids up to the cut off rate are allotted at bid rate. Competitive bids above the cut off rate are rejected. Non-competitive bids are allotted at the weighted average rate at the cut off rate determined at the auction, and all non-competitive bids are accepted in full. Where several bids sit at the cut off rate, they may be prorated at the discretion of the Auction Management Committee. So an aggressive competitive bidder and a marginal one, both accepted, earn different yields, while every non-competitive bidder in the same auction earns the same one.
The Bank retains wide discretion with Treasury approval: to accept or reject any bid, to accept more or less than the amount announced, to change the terms of an auction, to modify the terms of new securities, and to cancel an auction. It also acts as a buyer of last resort. If an investor needs to exit before maturity and cannot find a buyer in the secondary market, the Bank will rediscount the security at 3 per cent above the higher of the prevailing market yield or the coupon rate, a price set above the market reference, so that exiting through the rediscount window costs the holder more than a sale in the secondary market.
Reading two recent result sheets
The reopened fifteen and thirty year auction dated 07/09/2026 covered FXD3/2019/015, with 7.9 years to maturity, and SDB1/2011/030, with 14.4 years. Against a combined offer of 60,000.00 million shillings the Bank received 57,101.40 million on the fifteen year and 11,093.49 million on the thirty year, a total of 68,194.88 million and a performance rate of 113.66. The individual performance rates of 95.17 and 18.49 are each measured against the combined offer, not against a per-issue target, which is why the smaller figure does not mean that issue failed.
Acceptance was selective. The Bank took 41,139.13 million of the fifteen year and 6,609.37 million of the thirty year, 47,748.50 million in all, for a bid-to-cover ratio of 1.43. On the fifteen year the market weighted average rate was 12.8290 against a weighted average rate of accepted bids of 12.7631; on the thirty year the gap was wider, 13.7991 against 13.6937. Price per hundred shillings at the average yield came out at 99.5615 on the fifteen year, against a coupon of 12.3400, and 90.3598 on the thirty year, against a coupon of 12.0000.
The infrastructure bond auction dated 17/08/2026 was a different animal. Three reopened issues, IFB1/2019/016, IFB1/2021/018 and IFB1/2021/021, drew 460,398 million shillings of bids against an offer of 150,000 million, a performance rate of 307. The Bank accepted 312,027 million, of which 168,042 million was competitive and 143,985 million non-competitive, and recorded redemptions of 118,137 million and new borrowing of 193,891 million. Accepted rates ran 12.1960, 12.6877 and 13.0520 across the three tenors.
Analysis: the two averages measure different things
The gap between the market weighted average rate and the weighted average rate of accepted bids is the auction’s most useful single number, and it is the one the headline usually omits. The first is computed across the bid book; the second across what survived the cut off. On 07/09/2026 the fifteen year book showed 12.8290 against 12.7631 and the thirty year 13.7991 against 13.6937, so the truncation bit harder on the longer bond. A wider gap means the Bank cut deeper into the tail of higher-yielding bids. A gap near zero means the book was tight enough that the cut off barely bound.
The non-competitive share is the second thing worth reading, because those bidders take the auction’s own average and therefore transfer pricing power to the competitive book. On 07/09/2026 the thirty year took 3,475.47 million of non-competitive bids against 3,133.90 million competitive, so the majority of the accepted amount was priced by a minority of it. On the August infrastructure auction the split was 168,042 million competitive against 143,985 million non-competitive across a far larger book. Retail demand arriving as non-competitive bids does not discipline the yield; it accepts whatever the professional book produces.
The third comparison is between the offer and what was taken. In August the Bank accepted 312,027 million against an announced 150,000 million, and disclosed 118,137 million of redemptions in the same sheet, which shows the auction refinancing maturing paper as well as raising 193,891 million of new borrowing. In September it accepted 47,748.50 million against 60,000.00 million offered even though bids exceeded the offer. The discretion to take more or less than the announced amount is what makes the accepted amount, not the offer, the number that describes how much the Treasury actually borrowed on the day. A reader tracking the market across auctions gets more from that pair, plus the two averages, than from any single rate.
