Investors tap gains of up to 28.6pc from 2024 infrastructure bond

Key Takeaways

• Investors are realizing capital gains of over 28.6% from an 8.5-year infrastructure bond (IFB) traded on the Nairobi Securities Exchange (NSE).
• High demand for the bond, which offers a tax-free annual interest of 18.46%, is fueled by falling returns on new government issuances following Central Bank of Kenya (CBK) rate cuts.
• The inverse relationship between bond prices and yields in the secondary market has led to the IFB's price touching Sh128.57 per unit, significantly above its Sh100 face value.
• Other infrastructure bonds issued between 2023 and 2024 are also trading at premiums, contributing to substantial capital gains for sellers on the NSE.
• Retail investors with smaller holdings are increasingly selling these lucrative bonds in the secondary market due to limited interest-earning windows caused by amortized redemption structures.