Standard Investment Bank (SIB) warns that global energy disruptions, higher borrowing costs and rising inflation could hinder Kenya’s economic recovery, even as domestic liquidity stays stable and demand for government securities remains strong.

The Fixed Income Weekly Report dated 19 October 2026 notes that interruptions to international oil supply routes have pushed up petroleum prices, prompting the Energy and Petroleum Regulatory Authority (EPRA) to raise retail fuel caps for the 15 October‑14 November pricing cycle.

Super Petrol, diesel and kerosene retail prices rose by KSh12.93, KSh9.90 and KSh28.49 per litre respectively, reflecting higher landed costs caused by Middle‑East tensions that disrupted oil shipments.

International free‑on‑board prices for these fuels have surged since February 2026—by 89.45 % for Super Petrol, 90.64 % for diesel and 84.01 % for kerosene—while September landed costs were 11.81 % (Super Petrol), 11.32 % (diesel) and 9.41 % (kerosene) higher than August.

The price adjustments were smaller than the landed‑cost increase because the government‑to‑government procurement framework caps freight and premium costs, saving an estimated KSh17.04 per litre.

The reduced 8 % value‑added tax on petroleum products has been extended to 14 January 2027, and the Petroleum Development Levy Fund deployed KSh29.4 billion in FY 2025/26, including KSh24.3 billion between April and June 2026 to stabilise the market.

SIB cautions that continued supply constraints, especially for diesel, could raise import costs and domestic inflation further if Middle‑East tensions intensify.

On the debt side, global bond yields have risen, pushing Kenyan government security yields up by about 0.22 percentage points in the week, adding pressure to the country’s heavily domestically‑financed budget deficit.

Primary Treasury bond auctions attracted strong demand, with KSh84 billion of bids for two issues against a KSh50 billion offer (168 % subscription); the government accepted KSh53 billion, about 63 % of the bids received.

Accepted yields were 13.72 % for the 14.3‑year bond and 14.28 % for the longer‑dated issue, indicating the cost of raising funds over extended periods despite robust investor appetite.

Short‑term Treasury bills also saw high interest, with the 91‑day bill receiving KSh50 billion in bids against an KSh8 billion offer (623 % performance), though overall bill bids fell to KSh69 billion and secondary‑market turnover dropped 26 % week‑on‑week.