Nairobi, Jan. 7 -- The Treasury expects interest rates to decline further this year despite a widening budget deficit that will see the projected net borrowing from the domestic market cross the Sh1 trillion mark for the first time in the upcoming 2026/2027 fiscal year.

The government's increased borrowing appetite would ordinarily yield upward pressure in interest rates, but a liquid money market and Central Bank of Kenya (CBK) rate cuts saw returns from government securities fall last year.

Treasury bonds auctioned in 2025 paid coupons or interest rates of between 11.67 percent and 14.63 percent, down from highs of up to 18.5 percent in 2024.

Treasury bill interest rates fell to a range of 7.7 percent to 9.23 percent in the last auct...