Insights on the August Infrastructure Bond’s Oversubscription
The Central Bank of Kenya (CBK) reopened two infrastructure bonds, IFB1/2018/015 (15 years, maturing January 2033) and IFB1/2022/019 (19 years, maturing January 2041), during the August 2025 auction to raise KSh 90 billion. Investor demand was strong, with bids reaching KSh 323 billion. However, only KSh 95 billion worth of bonds were accepted, which is a 29.4% acceptance rate. The high yields were 13.0% for IFB1/2018/015 and 14.0% for IFB1/2022/019. This resulted in effective post-tax yields of 14.4% and 15.6%, respectively. With inflation around 4.1% in July 2025, these bonds provided appealing real returns of 8.9% and 9.9%, making them very attractive to institutional investors.
The Central Bank of Kenya (CBK) has announced a KSh 50 billion tap sale of two infrastructure bonds after last week’s record oversubscription indicated strong investor interest in tax-free government securities.
The sale, which runs from 19 to 21 August 2025, will reopen the fifteen-year IFB1/2018/015 and the nineteen-year IFB1/2022/019. These bonds drew bids worth KSh 323.4 billion against an initial KSh 90 billion offer. CBK accepted only KSh 95 billion, showing that there is still unmet demand. The tap sale will be given on a first-come, first-served basis, and settlement will take place on 25 August 2025. Pricing will reflect the weighted average accepted yields from the August 18 auction, adjusted for accrued interest. Investors will enjoy the same tax-free benefits as the initial issues.
| Bond Issue | Tenor | Maturity Date | Yield (%) | Adjusted Price (KSh 100) | Coupon (%) |
|---|---|---|---|---|---|
| IFB1/2018/015 | 15 yr | Jan 2033 | 12.9934 | 99.3937 | 12.5000 |
| IFB1/2022/019 | 19 yr | Jan 2041 | 13.9991 | 94.8458 | 12.9650 |
Investor Momentum
The record performance rate of 359% in last week’s sale showed unprecedented demand for long-dated, tax-free bonds. Analysts say this rush is due to the bonds being tax-exempt, offering higher coupons than shorter bonds, and more retail investors getting involved. Non-competitive bids alone totalled over KSh 64 billion, showing wide interest.
By quickly selling the infrastructure bond, CBK is using this momentum to raise more funds while maintaining market confidence. This issuance supports the government's plan for funding infrastructure. It does this without imposing additional tax burdens on investors.
The results of this tap sale will be closely monitored to see if demand stays strong, especially since there is a first-come, first-served allotment structure. Any funds not used in the reopened auction and tap sale may go to the NSE secondary market. This will improve the trading of these infrastructure bonds.
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