The Central Bank of Kenya (CBK) is extending its offer for a 10-year government bond, aiming to raise Sh15 billion (US$134.2 million) by Thursday or until its target is met.

This move comes as part of the bank's ongoing efforts to bring down interest rates in the domestic debt market.

The bond, first issued in March 2024, was the longest-dated security offered in over a year.

It initially carried a coupon rate of 16 per cent, reflecting the CBK's attempt to guide interest rates.

However, in the first sale, the bank only accepted Sh4.8 billion (US$43.3 million) after rejecting bids with high-interest rate demands.

These rejected bids had pushed the market-weighted average rate of return to a peak of 17.7593 per cent.

Governor Kamau Thugge had previously declared that domestic interest rates had reached their peak, attributing this shift to changing investor sentiment.

The successful redemption of Kenya's debut Eurobond is believed to have reduced anxieties concerning the country's sovereign risk.

Additionally, recent revisions to the national budget have lowered the amount of domestic borrowing required for both the current and upcoming fiscal years.

This has further fueled expectations of a decrease in interest rates on government securities.

The 10-year bond has been reopened for tap sales on multiple occasions.

In March, an additional Sh11.8 billion (US$106.8 million) was raised through a tap sale.

A reopening in April sought a further Sh25 billion (US$223.7 million), successfully mobilizing Sh10.9 billion (US$98.2 million) at a reduced weighted average rate of return of 16.2273 per cent, compared to the initial 16.5189 per cent.

Notably, the market-weighted average rate of return demanded by investors also eased to 16.6681 per cent, indicating a potential cooling down of interest rates in the government securities market.

In total, the 10-year bond has generated Sh27.7 billion (US$250.3 million) across three auctions.

The CBK appears to be using this specific bond as a benchmark to assess the effectiveness of its strategies to lower domestic debt interest rates.