Investors splashed a record Sh460.4 billion for the purchase of three infrastructure bond (IFB) bonds, underlining the abundance of cash in an economy that is seeking passive investments over setting up businesses.
In the August bond, the Central Bank of Kenya (CBK) targeted Sh150 billion from three reopened IFBs and received three times the securities on offer.
CBK accepted Sh312 billion from the offer, handing back Sh148.37 billion to investors.
The sale marks a continuation of the recent trend of Kenyans pouring billions of shillings into bonds and money market funds while shunning riskier ventures like starting a business, which presents an opportunity for the economy to create new jobs.
For businesses that have delayed investment decisions, the bonds market provides a platform to protect the value of idle capital at minimal risk, while also retaining value through returns that are above the average rate of inflation.
Infrastructure bonds provide an attractive option for the passive investor due to their tax exemption on interest, leading to large subscriptions whenever they are offered by the government.
‘The high subscription rate speaks to a dearth of opportunities in the real economy, where investors are seeing channeling of limited capital into investable options,’ said Churchill Ogutu, an economist and head of research at Capital A Investment Bank.
‘It is also indicative of market participants such as statutory bodies and foreigners who have high liquidity parking it in the IFBs, having waited for one year for a new issuance of the tax-free bonds.’
The amount offered in the bond is more than the Sh360.6 billion in new credit taken up by the private sector from banks in the 12-months to May 2026, highlighting the growing depth of the bonds market relative to investments in enterprises.
It also eclipses the Sh428 billion in equitable share of national revenue allocated to Kenya’s 47 counties in the 2026/2027 budget.
The previous bids record for a bond was the Sh323.4 billion offered in the previous IFB sold in August 2025.
While investors in the newly reopened bonds are set to enjoy regular tax free interest payments of between 11.75 percent and 12.73 percent per year, businesses have continued to struggle for funding, leading to slow growth in new jobs relative to the number of people coming into the labour market.
In 2025, Kenya’s economy added 824,100 new jobs, up from 782,300 in 2024, as per data from the Kenya National Bureau of Statistics (KNBS) Economic Survey 2026.
However, 88 percent or 723,100 of these new jobs were created by the informal sector, mirroring the difficulties of corporate Kenya in creating employment for thousands of graduates leaving universities and colleges each year.
The growth in the number of new jobs was achieved against a slower output as Kenya’s gross domestic product (GDP) expanded at 4.6 percent in 2025, from 4.7 percent in 2024.
In the first quarter of 2026, GDP growth stood at 5.3 percent, with the CBK projecting full-year expansion at 4.9 percent.
To achieve higher growth, the government has been pushing to grow lending to the private sector, which grew at an annual rate of 10.6 percent in June and 10.2 percent in July 2026.
While this marks the first time the growth has hit double digits since February 2024, it remains below the range of 12 to 15 percent deemed ideal to power healthy growth of the economy.
Meanwhile, billions of shillings have been channelled into passive assets, with the outstanding stock of government securities now standing at Sh7.3 trillion, while unit trusts hold Sh851.7 billion in assets under management.
Latest data from the CBK shows that commercial banks remain the largest domestic lenders to government at Sh2.64 trillion, followed by pension funds and insurance companies at Sh1 trillion each. The government’s total domestic debt stood at Sh7.46 trillion as at July 31, 2026.
Households have lent Sh470.2 billion to the government, accounting for 6.2 percent of the State’s domestic debt, while parastatals hold Sh529.9 billion worth of the debt. Foreign investors and non-financial corporations account for Sh313.5 billion and Sh112 billion of the debt respectively.
The State’s appetite for new debt from the domestic market is driven by its large budget deficit of Sh1.29 trillion for the 2026/2027 financial year, out of which Sh1 trillion will be financed through domestic borrowing.
The August IFB issuance therefore offered the CBK an opportunity to frontload the borrowing for the year, taking advantage of the high demand for the reopened papers in a market that had been starved of infrastructure bonds for one year.
By reopening a 16-year bond issued in October 2019 at 11.75 percent, an 18-year paper from April 2021 at 12.67 percent and a 21-year bond from September 2021 at 12.74 percent, the CBK also avoided the high interest rates normally associated with IFBs.
Some IFBs issued in 2023 and 2024 pay investors rates of between 14 and 18.5 percent annually, making them the most expensive in the government’s basket of domestic bonds.
Reopening the bonds at government-friendly rates fits in with the CBK’s policy of lengthening the maturity profile of government domestic debt while keeping borrowing costs low amid a growing public debt burden.
For retail investors who put up bids of Sh1 million or less, the reopened bonds represent relatively short exposure due to amortisation clauses that allow the CBK to repay part of the principal ahead of full maturity.
Amortisation in a bond means the staggered repayment of the principal amount within the life of a bond, usually done in order to lessen the burden of a large bullet settlement when the paper matures fully.
On the 16-year bond, the government will repay 50 percent of principal in October 2030, while the 18-year bond will settle half of its principal in April 2030.
All investments below Sh1 million will be repaid in full at the amortisation date, meaning that the bonds are effectively three- or four-year securities for investors who fall under this category.