More action on Kenya’s bond market

Bonds are becoming increasingly active in Kenya, and the bond market at the Nairobi Stock Exchange (NSE) is proving a good place to raise medium- to long-term capital. As in most African countries, the bond market is not well developed and has been dominated by government bonds and a few corporate bonds.

According to local press reports, NSE First Vice Chairman Lutaf Kassam said that turnover for the Fixed Income Securities Market Segment (FISMS) increased by over 127% to Sh65 billion ($851 million) for the first six months of this year, compared to Sh28 billion ($366 million) for the comparable period last year. Egypt’s bond turnover is reportedly $4 billion and South Africa’s $2 trillion.

Mr Kasaam is optimistic that this growth would continue, especially if companies realize the potential. The Kenya Government is also keen to boost the bond market. In recent budget submissions, Finance Minister Uhuru Kenyatta reduced withholding tax from 15% to 10% on bonds with at least a 10-year maturity in order to encourage long-term investment. He also announced the reduction of listing fees to encourage more listings.

Kenya’s Capital Markets Authority is also setting up an Over the Counter (OTC) market to improve liquidity as well as strengthening the legal and regulatory environment. CMA Chief Executive Officer Stella Kilonzo is reported as saying: “A Bond Steering Committee to oversee the overall implementation of the establishment of an OTC market for bonds has been meeting in June and it is expected to put in place appropriate structural arrangements for the market for the bonds,” said

The two officials spoke during the listing of the first tranche of the Sh5 billion ($65 mln) CfC Stanbic Bank fixed and floating rate note. The issue had been oversubscribed by 28%, according to a bank Executive Director. It is the first issue the bank has done for itself, but it has done several for others and announced plans to bring four issues valued at Sh17.5 billion ($230 million).

4 Responses to “More action on Kenya’s bond market”


  1. oscar juma

    hi

    i wish to know more about trading in bonds and possibility of becoming a bonds trader can you advise me more

  2. Tom Minney

    Hi Oscar, welcome to the blog and thanks for the inquiry. Learning about bonds trading will depend a bit on which country you are, and which securities market you will want to work with. You can choose to trade on your own account, or to get a job with a stockbroking or other company that trades in bonds. I would suggest it could be better to work for a company, you will learn in a professional working environment, you will make your early mistakes with your employer’s money, and you will see much of the inside of the market.
    If you want to read about the skills, there are a lot of sites and articles available if you search on http://www.google.com. However, I would rather look for the registered training institutes. I have used the exams of the South African Institute of Financial Markets (http://www.saifm.co.za/careerchoice.htm), and seen material from the UK one, the Financial Services Authority (www.fsa.gov.uk) but each country will probably have a similar regulator who will prescribe some examination and certification relevant to the local market.

  3. Daniel Broby

    You may find the following White Paper of interest: The Case Fro Frontier Fixed income. It can be downloaded at the SSRN website.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1441894

    Abstract: Frontier market debt is becoming increasingly attractive as an asset class, supported by the economic development of the less developed emerging markets. Analysis of the constituents of this off-benchmark asset class shows that allocation to it can potentially result in higher yield and better diversification. The authors argue that frontier fixed income should be included in strategic asset allocation using a technique known as reverse asset allocation.

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