Kenyans hoping to cash in on the tax-free returns of infrastructure bonds will have to settle for less this time round.

The Central Bank of Kenya (CBK) has gone to the market with its first infrastructure bond sale in a year — but instead of picking the high-paying papers investors were banking on, it reopened three older bonds that pay some of the lowest interest rates in the market.

What’s on Offer

In the August 2026 sale, the CBK is targeting Sh150 billion from three reopened bonds:

• A 16-year bond (first issued in 2019) paying 11.75%
• An 18-year bond (first issued in 2021) paying 12.67%
• A 21-year bond (also from 2021) paying 12.74%

That’s well below other infrastructure bonds already in the market, which pay anywhere from 13.7% to 18.5% a year.

Why This Matters

Infrastructure bonds are normally a favourite among Kenyan investors because, unlike regular government bonds, they’re tax-free — no 10% or 15% withholding tax is deducted from the interest earned.

In the past, that tax-free status plus attractive interest rates made these bonds a hot commodity. The most recent infrastructure bond, sold in August 2025, attracted a record Sh323.4 billion in bids — more than three times its Sh90 billion target, and almost as much as it cost to build the Nairobi–Mombasa section of the standard gauge railway.

But this time, because the rates on offer are so close to what ordinary (taxed) bonds are already paying, there’s little extra reward for investors who held out for an infrastructure bond.

Some Context on Rates

To put it in perspective, some of the best-paying infrastructure bonds in the last five years included:

• An 8.5-year bond from February 2024 at 18.46%
• A 6.5-year bond from November 2023 at 17.93%
• A 7-year bond from November 2022 at 15.84%

None of those were reopened this time. Instead, the CBK picked older, longer-dated, lower-paying bonds — a move that fits its broader strategy of stretching out government debt repayment timelines while keeping borrowing costs down, at a time when Kenya’s public debt burden keeps growing.

The Catch for Small Investors

If you’re a retail investor bidding Sh1 million or less, there’s an added twist: these bonds come with amortisation clauses, meaning the government repays part of the principal early instead of waiting until the bond fully matures.

• On the 16-year bond, half the principal will be repaid by October 2030
• On the 18-year bond, half will be repaid by April 2030

For small investors, any amount below Sh1 million gets paid out in full at that earlier amortisation date — effectively turning what looks like a 16- or 18-year investment into more of a 3-to-4-year one.

If you were waiting for infrastructure bonds to swoop in with a big tax-free payday, this round isn’t it. The rates are underwhelming compared to past sales, and small investors will get their money back much sooner than the bond’s official maturity date suggests.