The government has launched a KES 15B switch auction, inviting holders of the near-maturity FXD1/2021/005 (Nov 2026) to roll into the longer-dated FXD3/2019/015 (Jul 2034), effectively offering investors a cleaner carry and duration trade while easing the government’s 2026 redemption hump.
The incentive is a step up in coupon to 12.34% (vs 11.277%), a lower withholding tax of 10% (vs 15%) that enhances net yield, and a meaningful extension in duration to ~8.3 years (vs ~0.6 years), allowing investors to lock in elevated long-end rates now while positioning for potential capital upside if yields compress, rather than confronting reinvestment risk at maturity in a potentially lower rate environment.
From a sovereign liability management perspective, the switch smooths the domestic maturity profile without immediate cash outlay, pushing out near-term refinancing pressure into the long end of the curve.
source : CBK