Kenya’s secondary bond market’s turnover more than doubled to breach the KSh 1 trillion mark in 2024, as significant developments in monetary and fiscal policies improved investor demand.
- Bond activity at the Nairobi Securities Exchange (NSE) increased by 139.8% to KSh 1.544 trillion in 2024 from KSh 644 billion in 2023.
- The surge was driven by increased demand from both foreign and domestic investors attracted to the high-yielding infrastructure bonds.
- The early Eurobond refinancing improved investor confidence in the country and eased liquidity pressures, in turn strengthening the shilling notwithstanding the prolonged monetary policy tightening by the Central Bank of Kenya (CBK) in the first half of 2024.
“We attribute this overperformance to the oversubscribed IFB1/2024/8.5 bonds issue that witnessed a performance rate of 412.37%, with investors that missed out on the original issue securing positions in the secondary market, whilst those who had secured positions sought out to cash out and secure profits,” analysts at AIB AXYS noted in a research note.
The bond, which debuted in February 2024, was the highest grossing bond in the year with a coupon rate of 18.4607%, attracting a 412.4% oversubscription with significant foreign interest. Quarter on quarter, bond turnover NSE decreased by 4.99% to KSh 371.5 billion in Q4 2024 from KSh 391.04 billion the previous quarter.
Corporate bond activity was dampened in the year, with Treasury bonds dominating amid the decline in interest rates in the second half of 2024. Participation from local individual investors increased to 6.6% in the quarter ending December 2024 on the back of high interest rates and increased awareness. Similarly, local corporate investors participation increased to 91.7% in the final quarter of 2024.
2025, and the Future of the Bond Market
“We anticipate trading activity to remain elevated in 2025, as declining yields see investors seek out higher returns from older issues,” the analysts added.
The CBK and the Treasury are currently pulling from different ends over the East African Bond Exchange (EABX) setting up an over the counter bond trading platform. The EABX, backed by the Kenya Bankers Association and FSD Africa, was licensed by the Capital Markets Authority in February 2024 to offer an alternative platform for bond trading, rivaling the NSE.
The CBK declined to approve the EABX launch of trading of government securities in the secondary market citing potential market distortions. The National Treasury, on the other hand, supports EABX based on the 2009 industry agreement to create a self-regulating organization for fixed income trading.
