CBK opens switch window ahead of 2016 bond maturity
By Kenneth Mwenda, December 9, 2025The Central Bank of Kenya (CBK) has launched a rare bond switch auction, giving investors a chance to exchange the FXD1/2016/010 Treasury bond for the re-opened FXD1/2022/015 bond.
The FXD1/2016/010 bond, which matures in August 2026 and pays a 15.039 per cent coupon, can be swapped for the 15-year FXD1/2022/015 bond running until April 2037 with a 13.942 per cent coupon. CBK aims to raise Ksh20 billion through the switch, which runs from December 9, 2025 to January 19, 2026.
The auction itself will be held on Monday, January 19, 2026, with settlement on Wednesday, January 21, 2026.
Only investors holding the 2016 bond free of any pledge by January 19 are eligible. Investors can switch all or part of their holdings. The auction uses a multi-price format, allowing participants to quote the yield they want on the new bond, with the final price determined by the official pricing table.
Currently, the 2016 bond yields just over 8 per cent, trading at a dirty price of around 110.27, due to its maturity in less than a year. The switch allows investors to extend their investment for another 11 years at the market yield cleared in the auction.
Investors seek rate stability
The move comes as many investors face a potential challenge next August: when the 2016 bond matures, they will receive their principal back, but new long-term bonds are currently yielding 14–15 per cent. Switching now allows investors to lock in today’s high rates instead of waiting eight months, when rates may fall.
Although the new bond offers a slightly lower coupon of 13.942 per cent compared to 15.039 per cent, the effective yield depends on the auction’s clearing yield. For instance, if the auction clears at 14.50 per cent, investors exchange a bond yielding 8 per cent for the next eight months for a 15-year bond yielding 14.50 per cent.
A higher clearing yield, such as 15.50 per cent, would offer even better returns.
Non-competitive bids are capped at Ksh50 million per investor, while competitive bids start at Ksh2 million per Central Securities Depository (CSD) account. Any residual cash below Ksh50,000 after the switch will be refunded on January 21.
This switch provides a convenient way for holders of the maturing high-coupon bond to remain invested at current high yields without waiting for the open market in August 2026. Investors holding FXD1/2016/010 who wish to maintain exposure to long-term government securities should pay close attention. The auction window closes on January 19, 2026 at 10 am.