CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
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Wednesday, October 3, 2012

Ground Breaking Launch of Kenya Government Bond Index, October 3rd 2012
The Chairman of the Nairobi Securities Exchange (NSE);
Chief Executive, NSE, Mr. Peter Mwangi;
Officials of the FTSE Group;
Capital and Financial Market Executives;
Members of the Media;
Ladies and Gentlemen:
At the outset let me thank the Nairobi Securities Exchange Chief Executive for
inviting me to participate in this auspicious moment of the launch of the FTSE-NSE
Kenya Government Bonds Index. This achievement is indeed critical for the
development of a robust domestic financial market in Kenya. Today’s event comes at
a time when we as market players take pride in the success of our efforts in
spearheading market development. This collaboration among market players has
been instrumental in developing one of the fastest growing Bond Markets in Africa as
the Kenyan Bond Market is ranked among the top in Africa.
Ladies and Gentlemen: let me take a few minutes to make some remarks on the
initiatives and developments that have underlined the achievements of Kenya
Government Securities Market. Over the last one decade, the Central Bank of Kenya
in liaison with stakeholders in the financial sector has contributed significantly to the
following successes:
1. Longer Maturity Profile of Domestic Debt Instruments: average
maturity profile of government securities rose from 8 months or ratio of 76:24
in Treasury bills to Bonds in June 2001 to 5 years 5 months or ratio 20:80
currently. With a well-functioning secondary bond market in place, the
Government no longer faces rollover risks associated with short term debt
instruments.
2. Benchmark Bonds Implementation: successful implementation of
Treasury Bonds benchmarks and reopening to increase their liquidity since
April 2009 was a critical step towards addressing the Bond market
fragmentation problem and in the development of a reliable yield curve in our
market. About 16 benchmark bonds have so far been reopened bringing into
the market more than Ksh.138 billion and providing critical financing for the
national recurrent and development budget as per Government’s fiscal policy.

Ground Breaking Launch of Kenya Government Bond Index, October 3rd 2012
3. Project-Specific (Infrastructure) Bonds – The Government of Kenya
took a bold step in February 2009 to issue the first project/sector specific bond
with an aim to fund key infrastructure projects and set pace for public, private
as well as supranational agencies to tap the market for long term funding
through bond issuance. Five infrastructure bonds worth Ksh.130.85bn have so
far been issued thereby increasing the range of products in the market for
purposes of diversification.
4. Creating More Investment Opportunities to Spur National Savings
– The issuance of a 30-year Savings Development Bond in 2011 and the
reduction of minimum entry into Treasury bills market from Ksh.1,000,000 to
Ksh.100,000 in January 2009 were key milestones towards promoting a
savings culture among the populace and in widening the investor base for the
Government Securities market.
5. Putting in Place the Automated Trading System (ATS) – The
introduction of the ATS at the NSE in November 2009 was a great step towards
achieving bond trading efficiency, effective pricing, increased market
confidence and transparency as well as enhanced reliability and firming of the
yield curve.
Ladies and gentlemen, a well-developed and functioning financial market is
regarded as the lubricant for the economy. In order to further enhance the proper
functioning of the financial market, the Central Bank together with other market
stakeholders has been working on a number of initiatives to further enhance the bond
market so as to support the country’s development agenda under Vision 2030. These
reforms include:
Development of the Over The Counter trading platform,
Introduction of online bidding for government securities,
Implementation of government securities market makers.
The step taken by the Nairobi Securities Exchange to introduce the FTSE NSE
Government Bond Index is a welcome initiative for this market as the index will play

Ground Breaking Launch of Kenya Government Bond Index, October 3rd 2012
a key role in providing a benchmark tool for measuring market performance. It will
also facilitate diversification through emergence of new financial products and
market participants thereby encouraging foreign investors. Finally, it will have the
benefit of opening up the market to the rest of the world and increasing Kenya’s
financial sector competitiveness in the region and across the world. It surely does set
the pace for the regional market. I wish therefore to congratulate the Nairobi
Securities Exchange for the foresight of developing the bond index.
With these remarks, ladies and gentlemen, I now declare the FTSE NSE Kenya
Shilling Government Bond Index formerly launched.
Thank you all for your listening