Discussion Paper No. 73 of 2007 on Microstructure Elements of the Bonds Market in Kenya

Abstract

The importance of market microstructure in determining the success of a bonds market in allocating financial resources depends on the degree to which the microstructure elements have been designed to determine the proper price at which matching of demand and supply in an efficient and effective manner is done. This discussion paper analyzes some of the fundamental microstructure elements responsible for the current state of Kenya’s bonds market. The study investigates the liquidity, efficiency and volatility in Kenya’s bonds market and establishes that overall, treasury bonds’ market is better designed in terms of microstructure elements, and has been performing relatively better than the corporate bonds market.