John Mbadi Presides Over NSE's Launch Of Bond Reforms, Applauds Introduction Of Hybrid Bonds

• CS John Mbadi praised the introduction of a hybrid bond market at the Nairobi Securities Exchange (NSE)
• Mbadi highlighted the introduction of NSE's real-time Daily Yield Curve, which is designed to assess interest rates and guide investment strategies
• NSE chairman Kiprono Kittony emphasised the role of the reforms in providing public and private sector companies with affordable capital to support economic growth

Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research and reporting expertise, providing insights into Kenyan and global trends.

National Treasury and Economic Planning Cabinet Secretary John Mbadi presided over the launch of the bond market reforms at the Nairobi bourse.

During the event, he praised the introduction of a hybrid bond market, which he believes will broaden access to capital for Kenya’s economic growth without increasing the country’s debt burden.

Mbadi also highlighted the launch of NSE's real-time daily yield curve, a crucial tool for assessing interest rates in real time and guiding investment strategies.

According to a statement shared by the National Treasury on X, Mbadi said this development would empower investors to make informed decisions, ultimately strengthening Kenya's capital markets.

The Cabinet secretary emphasised the government's commitment to privatising state-owned enterprises, referencing successful examples like Safaricom and KCB Group.

What is the hybrid bond market?

A "hybrid fixed-income market" combines features from both traditional fixed-income markets and more flexible or innovative financial systems.

Traditional bonds are debt securities issued by governments or corporations, with fixed interest payments (coupons) over time and a return of the principal at maturity.

In Kenya, the Central Bank auctions Treasury bonds on a monthly basis but offers a variety of bonds throughout the year, and the bonds are listed on the NSE for secondary trading.

A hybrid market introduces innovations like improved transparency through real-time data (e.g., a daily yield curve), electronic trading platforms, and possibly the integration of bonds that have flexible terms or are linked to alternative financial instruments (like inflation-indexed bonds, green bonds, or performance-linked bonds).

Impact of reforms at NSE

NSE Chairman Kiprono Kittony also expressed support for the ongoing reforms, stating that they align with the NSE's vision and new priority focus areas.

He emphasised the need to provide both public and private sector companies with avenues to raise patient and affordable capital to foster economic growth.

"The current ongoing reforms build on our vision and new priority focus areas that will enable the NSE play a more dynamic role in offering both public and private sector companies an avenue to raise patient and affordable capital that will support the country's economic growth," Kittony said.

The Chief Executive Officer of the NSE, Frank Mwiti, further noted that the positive engagement between the NSE and the government has facilitated the implementation of policies that boost domestic and international investor confidence.

NSE faces bonds market competition

Earlier, TUKO.co.ke reported that the Capital Markets Authority (CMA) of Kenya had granted the East African Bond Exchange (EABX) a license for OTC trading, setting the stage for competition with NSE.

OTC (over-the-counter) trading is often used for securities that are not listed on a formal exchange or for large block trades that may not be efficiently executed on the open market.

This move is driven by the CS for Treasury with a focus on revitalising the Kenya Bond OTC Markets initiative to increase market depth and liquidity of Government bonds.

Proofreading by Otukho Jackson, a multimedia journalist and copy editor at TUKO.co.ke

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CS John Mbadi at the Nairobi Securities Exchange (NSE).

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