How Bonds Work in Kenya: Guide to understanding Bonds


There are various  forms of investment in capital markets and money markets.

In these markets the parties with surplus cash (investors) lend money to the parties with deficit or not  enough cash. (cooperation’s and governments)

Bond issuance is one way of acquiring enough cash/capital. Here, investors and companies or the government come up with well-defined agreements involving huge amounts of money, say millions and billions.

Wait! Wait! let’s pause for a moment. Let’s start from the basics.

what are bonds

Bonds are tools of debt. what do I mean? By this I mean that they are loans through which government or companies raise debt capital to fund their operations or their planned capital projects.

Just like a normal loan a bond has periodic interest payments and a maturity date.

The investor benefits from periodic interest rate payments. A bond certificate is also given to the investor.

The party that receives the funds from the investor is the issuer of the bond. Bonds are normally long-term and therefore they are traded in capital markets and not in money markets where short-term tools are traded.

a person holding dollar notes

Types of bonds

1.Corporate bonds

These kind of bonds are issued by corporations/companies. Companies raise this bonds to raise capital for their projects.

This type of bond normally has higher interest rates than treasury bonds. The interest rates of this bond are taxable.

It’s only companies listed in the stock exchange markets which are able to benefit from this bond.

Investment banks act as intermediaries between investors and issuers to make this capital readily available to companies.

2.Treasury bonds

Treasury bonds are issued by the government. They are normally issued when there is a lot of money in circulation in the economy.

The citizens then obtain these bonds and the level of money in circulation is regulated. It’s also a tool used to control inflation rates. The periods differ from country to country.

In Kenya treasury bonds are normally long term but some have short periods of even up to 90 days. Bonds are normally low risk  investments. This is because they are backed up by the government which almost never defaults.

 How bonds work.

let’s do some simple calculations.

Let’s say you purchase a 10 year treasury bond of Sh10 million paying 3%interest with periodic payments of 6 months.

The issuer (government) will pay you Sh 300,000 every six months and repay the principal amount at the end of 10 years.

You will then be issued with a bond certificate stating the terms of agreement. You can then sue the issuer incase of default.

Bonds are also evaluated. This is done through bond rating.

Bond rating is where the financial capability of the institution issuing the bond is measured in order to check how risky the bond is.

According to one common bond rating agency Moody’s and Fitch. The higher the bond rating the safer the bond is.

High rating bonds offer low interest rates compared to the lowly rated bonds. Lowly rated bonds have higher interest rates due to the additional risk.

Advantages of bonds

The advantage of bonds is that their values don’t fluctuate

2. they offer a continuous stream of income to the investor in the long run.

The disadvantage of bonds is that their returns are generally low compared to the returns of common stock.

Before I wrap it up I want to elaborate what’s a Eurobond.

Eurobonds.

Eurobonds are debt tools denominated in another currency and not in home currency. That means that they are issued in an external currency.

Eurobonds are therefore external bonds. They are used to raise capital by the organisations or governments which have the ability to issue them in another currency.

It’s not that the bond is issued in Europe. This bond is just issued in a currency other than the home currency of the country or even of the market in which it’s issued.

By the way have you ever purchased a bond? Let me know in the comments section below.

It’s not too expensive to purchase a bond. You could even purchase bonds as a group. Commonly an investment chama.

I hope that you find this information helpful. If you plan to purchase one soon, thumps up. And keeping checking the blog for more information and knowledge on financial topics.

This Post Has 77 Comments

  1. dan

    great lesson learned ….Thanks

  2. ski-roues.net

    I visited many sites however the audio quality for audio
    songs present at this web page is actually superb.

    Here is my website ski-roues.net

  3. yunke029.com

    Hi there! Would you mind if I share your blog
    with my myspace group? There’s a lot of people that I think would really appreciate your content.

    Please let me know. Thanks

    My webpage yunke029.com

  4. I enjoy you because of your own work on this website.

    My mom takes pleasure in working on internet research and it’s really easy to see why.
    Many of us know all regarding the powerful manner you create both interesting and useful tips by means of the web site and inspire participation from other ones about this article and my girl is now learning so much.

    Take pleasure in the rest of the new year.
    Your conducting a pretty cool job.

    Stop by my web-site … http://www.anapapansion.ru/

  5. kebe.top

    As I website possessor I think the written content here is
    very great, appreciate it for your efforts.

    my homepage: kebe.top

  6. Myronfot

    online dating service
    [url=”http://datingfreetns.com/?”]mature dating [/url]

  7. What’s Taking place i am new to this, I stumbled upon this I have
    discovered It absolutely helpful and it has helped me out loads.
    I’m hoping to give a contribution & aid other customers like
    its helped me. Good job.

    Also visit my website … http://www.fles.hlc.edu.tw

  8. freeholmes.com

    It’s very easy to find out any topic on web as compared to textbooks,
    as I found this article at this site.

    Also visit my web site … freeholmes.com

  9. best delta 8

    Hello there! I know this is kind of off topic but I was wondering which blog platform are you using for this site?
    I’m getting sick and tired of WordPress because I’ve had issues with
    hackers and I’m looking at alternatives for another platform.
    I would be awesome if you could point me in the direction of a good platform.

    Here is my web site :: best delta 8

  10. Florene

    I?m impressed, I have to admit. Rarely do I encounter a blog that?s both educative and interesting, and without
    a doubt, you have hit the nail on the head. The issue is something that
    too few folks are speaking intelligently about. I’m
    very happy I stumbled across this in my hunt for something concerning this.

    My webpage Florene

  11. www.qiurom.com

    I do not know if it’s just me or if perhaps everybody else encountering issues
    with your website. It looks like some of the text in your posts are
    running off the screen. Can somebody else please provide feedback and let me know if this is happening to them as well?

    This could be a issue with my internet browser because I’ve had this happen before.
    Kudos

    Here is my website: http://www.qiurom.com

  12. Marylyn

    Thanks for finally writing about > How Bonds Work in Kenya:
    Guide to understanding Bonds – Financebuddy < Loved it!

  13. I’m not sure why but this site is loading very slow for me.
    Is anyone else having this problem or is it a problem on my end?
    I’ll check back later and see if the problem still exists.

  14. I love your blog.. very nice colors & theme. Did you design this website yourself or did you hire someone
    to do it for you? Plz reply as I’m looking to construct my
    own blog and would like to know where u got this from.
    kudos

  15. situs slot online

    Nice replies in return of this question with firm arguments and explaining everything concerning that.

  16. You really make it seem so easy with your presentation but I find this matter to be
    really something which I think I would never understand.
    It seems too complex and extremely broad for me.
    I am looking forward for your next post, I’ll try to get the hang of it!

  17. I’ve been Ƅrowsing online greater thаn thгee hours as of late, but I never discovered any attention-grabbing
    aгtiсle liкme yߋurs. It’s pretty price suufficient for me.
    Persⲟnally, if all site owners and bloggeгs made eхcellent content as you did,
    thee web shall be a lot more helpful than eveг before.

    My site; judi slot onlinebandar bola online

  18. Saya telah berselancar online lebih dari 2 jam hari ini,
    namun saya tidak pernah menemukan artikel menarik seperti milik Anda.
    It is cukup berharga bagi saya. Menurut pendapat saya , jika semua
    pemilik web dan blogger membuat konten yang baik seperti
    yang Anda lakukan, web akan menjadi a jauh lebih berguna dari sebelumnya.

    My blog … Joker388 mobile; https://gameaco.com/,

  19. situs poker idn

    Thank yyou for any otһer fantastic post. The place else could anyone get
    that kind of information іin such an ideal way of writing?
    I’ve a presentation next week, and I’m on thee search for such information. http://rentalsp.com/disenos/52/

  20. idn poker

    Hmmm it looks ⅼike your site ate my first cⲟmmеnt (it was super long)so I guess I’ll just sum it up
    whqt I wrote and say, I’m thoroughⅼy enjoying your blog.

    I as well am an aspiring bloց writer but Ӏ’m still new to the whole thing.

    Do you have aany tips andd hints for inexperienced blog writers?
    I’d ceгtainly appreciate іt. https://muabannhadatmoi.com/user/profile/41960

  21. Hello there! I simply would like to offer you a huge
    thumbs up for your excellent info you’ve got right here on this post.
    I am returning to your site for more soon.

  22. situs slot online

    Your way of describing the whole thing in this post
    is truly nice, all be capable of simply be aware of it, Thanks a lot.

  23. nowa

    Hi, after reading this amazing post i am also glad to share my familiarity here with mates.

    My page; nowa

  24. situs slot online

    It’s an amazing piece of writing designed for all the internet viewers;
    they will take benefit from it I am sure.

  25. situs slot online

    Good way of telling, and nice article to take information regarding my presentation focus, which i am
    going to present in university.

  26. returngain.com

    It’s really very complex in this active life to listen news on Television, thus I only use world wide web for that reason, and take the most recent information.

    Review my page: returngain.com

  27. Just desire to say your article is as astounding.
    The clearness on your post is simply spectacular and i can suppose you’re an expert in this subject.
    Fine along with your permission let me to seize your RSS feed
    to keep updated with drawing close post. Thanks a million and please keep up the gratifying work.

    My blog post :: http://www.cowerdesign.com

  28. Normally I do not learn article on blogs, however I would like to say that this write-up very pressured me to check out and do so!
    Your writing style has been surprised me. Thank you, very great post.

    Also visit my site http://rantsforchange.ca

  29. Thank you a bunch for sharing this with all of us you actually know what you’re talking about!

    Bookmarked. Kindly additionally seek advice from my website =).

    We may have a hyperlink exchange agreement among us

    Here is my site: exterminatorsouthflorida.com

  30. https://spyep.com

    Hi there to every one, for the reason that I am genuinely eager of reading this blog’s post
    to be updated regularly. It carries nice data.

    my web page – https://spyep.com

  31. You made some good points there. I checked on the internet for additional information about the issue and found most individuals
    will go along with your views on this web site.

  32. click this link

    Appreciation to my father whօ told me concerning this blog, this blοg is actually amazing.

  33. www.wangdaitz.com

    Hi there, I found your site by way of Google
    at the same time as looking for a similar subject,
    your website got here up, it seems to be great.
    I have bookmarked it in my google bookmarks.[X-N-E-W-L-I-N-S-P-I-N-X]Hello there, just
    was alert to your blog via Google, and found that it is truly informative.
    I’m going to be careful for brussels. I will be
    grateful in the event you continue this in future.
    Lots of other people shall be benefited from your writing.
    Cheers!

    My site: http://www.wangdaitz.com

  34. I am really impressed together with your writing talents as well as
    with the format to your weblog. Is that this a paid
    topic or did you modify it yourself? Either way stay up the excellent quality writing,
    it is rare to peer a great weblog like this one today..

    Here is my website: http://litdevelopments.com/

  35. What’s up mates, how is everything, and what you want to say about this piece of writing, in my view its
    genuinely amazing in favor of me.

  36. www.1stanapa.ru

    That is a good tip especially to those fresh to the blogosphere.

    Brief but very precise info? Many thanks for sharing
    this one. A must read post!

    my blog post … http://www.1stanapa.ru

  37. Unquestionably imagine that that you stated. Your favourite
    justification seemed to be on the web the simplest thing to keep in mind of.
    I say to you, I certainly get irked at the same time as folks consider concerns that they plainly do not realize about.
    You managed to hit the nail upon the top as neatly as outlined out the entire thing without
    having side-effects , people can take a signal. Will probably be back to get more.
    Thank you

    Here is my site; http://www.askmeclassifieds.com

  38. Do you have a spam issue on this website; I also am a blogger, and I was wondering your situation; many of us have created some nice methods and we are looking to exchange techniques
    with other folks, why not shoot me an e-mail if interested.

    Also visit my page :: http://www.affiliateclassifiedads.com

  39. cunt

    Excellent post however I was wanting to know if
    you could write a litte more on this topic? I’d be very thankful if
    you could elaborate a little bit further. Many thanks!

  40. Situs Togel

    whoah this weblog is great i like reading your posts.
    Stay up the great work! You know, many persons are looking round for this info,
    you can help them greatly.

  41. Every weekend i used to go to see this web page, for the reason that i want enjoyment,
    since this this website conations actually good funny stuff too.

  42. ariv_ondemand

    Howdy! This is kind of off topic but I need some advice from an established blog.
    Is it hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast.

    I’m thinking about creating my own but I’m not sure where
    to start. Do you have any points or suggestions? Thanks

  43. news

    Hello, I enjoy reading all of your article. I
    wanted to write a little comment to support you.

  44. judi bola

    Hi there very nice site!! Guy .. Excellent ..
    Wonderful .. I will bookmark your blog and take the feeds additionally?
    I am satisfied to find a lot of helpful information here within the submit, we want develop extra strategies in this regard,
    thank you for sharing. . . . . .

  45. When some one searches for his essential thing, so he/she wishes to be available that in detail, so that thing is maintained over here.

  46. sv388.net

    It’s amazing in favor of me to have a site, which is good in support of
    my knowledge. thanks admin

  47. advice

    Hi it’s me, I am also visiting this web page daily, this web site is genuinely good and the users are actually
    sharing fastidious thoughts.

    Feel free to surf to my homepage advice

Leave a Reply