COVID-19: How the pandemic has impacted Kenya’s bond market

The COVID-19 pandemic has had a significant impact on Kenya's bond market, leading to a subdued market and a decrease in economic activity. Economic analyst Odhiambo Ramogi discussed how the pandemic has affected both the bond market and the shares market in Kenya. The collapse of major companies like Nakumatt Supermarket, Imperial Bank, Chase Bank, and Athi River Mining has left thousands of corporate bondholders in financial distress. The Capital Markets Authority in Kenya has acknowledged the depressed and illiquid state of the corporate bond market. Ramogi highlighted that the market has experienced a decline of 17.68% between the first and second quarters, with the lockdown measures in place contributing to the economic downturn. The economy shrank by approximately 5% in the second quarter alone, underscoring the significant impact of the pandemic on the bond market. He noted that it will take time for the market to fully recover, given the challenges posed by the ongoing crisis. The dominance of government bonds due to high interest rates and the failure of some companies to meet their obligations have also contributed to the sluggish nature of the bond market. The director of the Capital Markets Authority suggested the need for stricter regulations to prevent future collapses of corporate bond issuers. Ramogi emphasized the importance of corporate governance in ensuring that investors receive value for their money. Despite the challenges faced by the bond market, foreign investors have continued to show interest in Kenya's stock market, particularly in blue-chip companies like Safaricom and KCB Bank. However, there is a cautious approach towards corporate bonds among investors, who are wary of potential risks associated with these investments. The overall economic outlook for Kenya is bleak, characterized by a downward trend exacerbated by the impact of the pandemic. While the government reports positive economic growth figures, the reality on the ground paints a different picture, with many businesses struggling to stay afloat. The current state of the bond market and the economy reflects the challenges faced by the country in navigating through these turbulent times.