Effect of Macroeconomic Factors on the Development of Bond Market in Kenya

Abstract

Effective and efficient financial markets globally have sound performance that attracts foreign and regional investors. Bond securities are perceived to be less risky and has high yield. As a result, both government and corporations prefer financing their long term projects using debt securities such as bond. However, the bond market in Africa is still wanting. Though Kenya has made many strides in developing its bond market, there are still more that need to be addressed in order to reach its optimal and compete with the global bond markets. And one aspect is macro-economic factors. Therefore, the purpose of this study will be to establish the effect of macro-economic factors on the development of bond market in Kenya. The specific objectives will be; to determine the effect of exchange rate on the development of bond market in Kenya, to assess the effect of interest rates variability on the development of bond market in Kenya and to investigate the effect of inflation rate on the development of bond market in Kenya. The study will adopt causal research design with a target population of all the 81 issued government and corporate bonds in the bond market; which will be based on the census sampling method. Secondary data will be used and data collection extract will be developed to help in accessing the data from CBK, NSE, and KNBS among others. Data will be analysed using regression model scientific package of social sciences (SPSS).