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Kenya: Bond Market Now Gets Its Own Index
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The East African Standard (Nairobi)
30 April 2008
Posted to the web 30 April 2008
James Anyanzwa
Nairobi
AIG Fund managers have unveiled the first ever bond index.
It will measure the performance of fixed income securities (bonds) at the Nairobi Stock Exchange (NSE).
With the new index, investors in the bond market will monitor activities, determine the direction of the market, and make informed investment decisions.
The AIG Government Bond Index, which is considered a more accurate measure of actual performance market activities, will apply for selected fixed Treasury bonds with a maturity period of more than 13 months.
"Debt instruments have gained prominence with increased investment in long term bonds and securities driven by the need to diversify client's portfolio to less riskier options, creating the need for a more reliable benchmark," Mr Peter Wachira, a senior investment manager at AIG Investment Co Ltd, told a media briefing yesterday.
Since the Government re-launched its long-term bond programme in 2000, the debt market has witnessed a significant shift with outstanding Treasury bonds accounting for more than 70 per cent of the domestic debt.
In 2000, statistics indicate that 80 per cent of the Government debt was held in the 91-Day Treasury Bills and only 20 per cent in long-term bonds.
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Currently, the trend has, however, shifted with the Government holding 74 per cent of its debt portfolio in long-term instruments and 26 per cent in Treasury Bills.
Over the years, CBK and Treasury have lengthened the maturity profile of the Government debt instruments, with the bond with the longest tenor being a 15-year paper at present.
According to statistics, the bond market recorded an all-time high turnover of Sh77 billion, just a close distance behind the equity market's Sh88 billion.
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