Kenya’s bond market recorded strong growth in 2025, marking a major turnaround for the Nairobi Securities Exchange (NSE). Secondary bond market turnover rose to about Sh2.7 trillion, up sharply from Sh1.5 trillion in 2024. This growth followed a shift in monetary policy by the Central Bank of Kenya (CBK). The CBK reduced its benchmark interest rate from 13 percent to 9 percent, making bonds more attractive to investors.
As interest rates fell, investors increased demand for existing high-coupon government bonds, especially infrastructure bonds issued in earlier years. This demand drove higher trading volumes in the secondary market and generated capital gains for many investors.
Impact on Banks
The bond market recovery boosted the performance of stockbrokers and investment banks. Higher trading activity increased commission income across the industry. Many firms returned to profitability after several difficult years. Institutions with diversified revenue sources performed best. These firms earned income not only from trading commissions but also from fund management fees and investment income.
The improved performance showed that the bond market revival benefited the wider financial services sector. It also restored confidence in Kenya’s capital markets.
Growing Role of Retail Investors
Retail investors played an important role in the bond market expansion. The CBK introduced the Dhow Central Securities Depository (CSD) platform to improve access to government securities. This digital platform made it easier for individuals to buy and sell bonds directly.
By early 2026, household holdings of government bonds reached about Sh437.7 billion. This growth showed rising public interest in fixed-income investments. It also supported financial inclusion by allowing more Kenyans to participate in the bond market.
Early Signs from 2026
Market activity in early 2026 confirmed continued momentum. A Treasury bond switch auction held in January attracted strong demand and was oversubscribed. Investors showed clear interest in long-term government bonds. Accepted yields declined further, reflecting strong competition for these securities.
Low inflation levels helped maintain attractive real returns. Both local and foreign investors continued to view Kenyan bonds as appealing investments.
Outlook for 2026
According to an interview by Business Daily, analysts project secondary bond market turnover of between Sh3.2 trillion and Sh3.8 trillion in 2026. Several factors support this outlook. These include continued accommodative monetary policy, slow private sector credit growth, and increased use of digital investment platforms.
Overall, the evidence suggests that Kenya’s bond market recovery reflects a long-term structural change rather than a short-term rebound. If current trends continue, the NSE will strengthen its position as a leading fixed-income market in East Africa.
