CBK opens Kenya's government securities market to global investors via Clearstream

The Central Bank of Kenya has opened Kenya's government securities market to global institutional investors. By connecting the Government Central Securities Depository (DhowCSD) to Clearstream, the post-trade settlement arm of Deutsche Börse Group, foreign fund managers can now buy Kenyan Treasury bills, government bonds, and infrastructure bonds through a single omnibus account, without opening custody accounts in Kenya.

With this move, institutional investors will be able to invest in government bonds, infrastructure bonds, and Treasury bills through a single omnibus account structure. 

Eligible foreign investors will be able to hold and settle Kenyan Treasury bills and bonds directly through the CBK Clearstream Connect from 29 June 2026 without having to go through multiple local custody arrangements. 

With this, Kenya joins the Clearstream network as its 60th domestic market globally and only the second in Africa, after South Africa.

For market participants, expanding the investor base may improve the demand for government debt and strengthen the domestic bond market as the government continues to finance infrastructure projects and refinance its maturing obligations.

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How does the CBK Clearstream connect work? 

When the CBK launched DhowCSD in July 2023, the platform aimed to democratize bond trading for retail investors, giving Kenyans in the diaspora the opportunity to invest via an app rather than visiting physical CBK branches, and within months of the launch, the platform added over 7,000 new accounts. 

The CBK is now leveraging the same platform for a different purpose, which is connecting it to Clearstream. 

Clearstream operates the central securities depositories of Germany and Luxembourg, as well as an international central securities depository serving the Eurobond market. By connecting it to DhowCSD, Kenya eliminates the barrier that historically locked foreign institutional investors out of its local-currency debt market. 

The connection allows foreign investors to trade government securities without having to open separate accounts in Kenya. It also lets Clearstream hold securities for multiple clients under one omnibus account. 

Having an omnibus account means that a Clearstream client in Frankfurt, London or Singapore is exposed to Kenyan government paper through their existing Clearstream account. Foreign investors do not need to complete local registration or a separate compliance process with the CBK. 

Standard Chartered Kenya serves as Clearstream's cash correspondent bank for Kenyan shilling transactions and as its local custodian with the CBK. That means the actual settlement of shilling payments and the safekeeping of the underlying securities inside Kenya sit with Standard Chartered, while Clearstream handles the client-facing account infrastructure abroad.

All Clearstream clients can settle and safekeep Kenyan government debt securities, use debt instruments in collateral management facilities, and perform foreign exchange services, all through a single point of access.

Why Kenya’s government securities market access matters

Opening Kenya’s government securities market to a wider international investor base could increase competition during government debt auctions. It may also support better demand for government securities, especially when domestic liquidity becomes constrained. 

The National Treasury's fiscal deficit forecast for 2026/27 is 1.15 trillion KES, with planned expenditure of 4.82 trillion KES compared to forecasted revenue of only 3.64 trillion KES. This deficit is to be financed by the domestic market. 

Projections indicate that the government will borrow 1.03 trillion shillings through the domestic market, while the remaining 116.2 billion KES will be raised through external borrowing.  

The borrowing Kenya requires has pushed the debt stock to record levels, with the debt-to-GDP ratio nearing 70%. With foreign investors entering the market via CBK Clearstream Connect, domestic investors are no longer required to absorb the bulk of government paper, which may ease borrowing costs.

Global demand for Kenyan debt will still depend partly on the wider dollar environment, since a stronger DXY can make emerging-market assets relatively less attractive to international investors.

More participation also improves liquidity in the secondary market. The increased trading activity should lead to more efficient price discovery over time and less volatility during periods of heavy trading, making it easier to purchase and sell securities. 

For the Kenyan government, increased demand for domestic debt would help keep borrowing rates down when market conditions are favorable; however, the financing rates would rely on inflation rates, monetary policy, fiscal conditions, and global trends in interest rates. 

How could the DhowCSD Clearstream arrangement impact capital flow and yield? 

Kenya's Treasury bills and bonds currently stand at about 7.1 trillion KES combined, with foreign investors holding roughly 4.2% of the total. Commercial banks, insurance companies, and pension funds remain the main investors. 

Foreign participation could compress yields in Kenya's domestic bond market over time, reducing the government's cost of borrowing in local currency in a situation where public debt servicing becomes a fiscal pressure. 

An increase in competition at Treasury bond auctions introduces downward pressure on the yields that domestic investors can demand, easing the government's interest burden.

Aside from direct capital inflows, the DhowCSD Clearstream arrangement positions Kenya for inclusion in global bond indices. Index providers such as JPMorgan, which runs the GBI-EM benchmark, and FTSE Russell require that foreign investors be able to access a market without significant impediments. 

The Clearstream omnibus account structure satisfies that requirement. Index inclusion could trigger automatic, rules-based inflows from funds benchmarked to those indices. The scale of such inflows may exceed what active participation alone can generate. 

Overall, the DhowCSD Clearstream arrangement signifies Kenya's integration into the global financial system and puts the country on a path to becoming one of Africa's leading financial centers.

What this means for forex market participants

For market participants, increased foreign participation may support currency flows. As international investors buy Kenya government securities, KES demand for settlement may provide some support to the shilling.  

Although lower government borrowing costs are possible, outcomes will depend on the pace of inflows. The pace and scale of inflows will depend on how global fund managers allocate to Kenya following the link's activation. 

Market participants will likely monitor several indicators over the coming months, which include: 

• Foreign participation in government debt auctions, which may indicate that the new settlement arrangement is improving market accessibility.
• Future policy communication from the Central Bank of Kenya, updates on financial market reforms, liquidity management, and debt market development.
• Interest rate decisions by major central banks, changes in investor risk appetite, and international capital flow trends. 

Conclusion 

The CBK Clearstream Connect opens Kenya’s government securities market to a wider international investor base through DhowCSD Clearstream. 

While the long-term impact will depend on several economic conditions and the international investment environment, the move strengthens Kenya's efforts to modernize its capital markets and increase participation in government debt.

For forex traders, the arrangement is an indicator of how financial market reforms can influence capital flows, investor sentiment, and the broader macroeconomic landscape. Traders who monitor these developments alongside monetary policy and global market trends may gain valuable context as conditions evolve. 

For more insights into foreign participation in the securities market, visit Exness Insights. To stay up to date on Kenya’s government securities market, visit the Exness Blog page.