Anyone can invest in bonds as long as they hold an account with any local commercial bank. The minimum amount needed to invest in a bond is Ksh100,000.

Government bonds are debt tools which the government uses to fund budget-related projects. Corporate bonds are controlled by private institutions. These institutions sell debt through public securities the same way they sell stock. These bonds generate more interest than bank accounts.

The Central Bank is set to reopen a 10-year Treasury bond and a 5-year Treasury bond later this month. The move is intended to raise Ksh10 billion. The bond auction kicked off today and will run until the 24th of July. It will have a coupon rate of 12.705 percent for the 10-year bond will have a coupon rate of 12.7% while the 5-year bond will have a rate of 12.8%.

Last month the weighted average yield of the 10 year bond fell to 12.7%. The 5-year bond yield, however, rose to 13.8% last August.

KenGen opened a 12.5% 10-year bond in 2009 worth Ksh15 billion. The interest likely to be earned from the bond is exempt of taxes. This led to oversubscription among investors. The Kenyan bond market has experienced a rise in liquidity and a high turnover due to the use of automation at the NSE. This has encouraged the government to increase the maturity of their bonds to 30 years. Private bonds have a maximum maturity of 10 years. They also have generally higher returns because a company can go bankrupt at any given time. The higher the risk factor the greater the returns.

On the other hand, government bonds are more secure because the treasury can print more bills in case of an economic crisis. Private institutions do not have that luxury. Ken Minjire, a Fixed Income analyst at Stanbic Investments says, “The price of a bond usually depends on risk assessment.” Despite the fact that government bonds are secure, the returns are relatively lower than those of private bonds.