Nairobi — A leading investment group has called on the Government to issue a long-term bond as a way of establishing a reliable yield curve for Kenya's capital markets. Currently, the Government uses bonds to raise short term financing for its budgetary deficits, with the longest tenor being a 15 bond floated earlier this year.

American International Group (AIG) Managing Director for global equities, Ms Deborah Medenica, said that a yield curve could assist in determining rates of return for different instruments in the capital markets. She said such a curve would also accelerate the deepening of capital markets by attracting more players, including international investors.

A yield curve is a chart that graphically shows the yields of different bonds of the same credit quality and type. It can be drawn from a long-term bond issued by the Government for the purpose of achieving its monetary policy targets.

"Emerging markets governments need to put in place long term policies that will bring more stability in equity yield curve pricing," said Medenica.

AIG East Africa CEO, Mr Jonathan Stichbury, said Kenya currently relies on the Reuters and the Central Bank yield curves, but there is still no single yield curve for bonds.