An Analysis Of Determinants Of Risk Spread In Corporate Bond Markets: The Case Of Firms Listed At The Nairobi Stock Exchange

Abstract

The study of this project is on how the determinants of the credit spreads on bonds affect the speared on the corporate bond market. Given the attention and growth the bond market has received in the recent years coupled with the interest of firms to issue bonds instead of equity or take commercial loans, the study seeks to find out hoe default risk, inflation, interest rates and other macroeconomic factors influence the behavior of spreads at the bourse. The study seeks data from the CMA, NSE and central bank to analyze the determinants of spreads and find if there any relationships among the variables. Trading of corporate bonds will be used and compared with yields of the same maturity from the treasury bonds and the difference analyzed. Data was analyzed using advance excel programs such as regression and ANOVA tables. Data has also been presented in terms of tables, charts, graphs and pie charts. Findings indicate that the corporate bond market trading at the secondary market is still under developed. Majority of bonds are traded are government on the basis that are default free. Only Kengen has recorded majority of trades at the bourse at the secondary market. More incentives and program are underway by the CMA and NSE to increase bond trading at NSE for corporate issues.