Determinants of Kenyan Goverment Bond Yields

Balozi, Salome Kemunto

dc.creator	Balozi, Salome Kemunto
dc.date	2017-02-27T13:35:49Z
dc.date	2017-02-27T13:35:49Z
dc.date	2017-02-27
dc.date.accessioned	2017-03-19T20:40:38Z
dc.date.available	2017-03-19T20:40:38Z
dc.identifier	http://ezproxy.kca.ac.ke:8010/xmlui/handle/123456789/180
dc.identifier.uri	http://41.89.49.13:8080/xmlui/handle/123456789/629
dc.description	A DISSERTATION REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF MASTER OF SCIENCE IN THE SCHOOL OF BUSINESS AND PUBLIC MANAGEMENT AT KCA UNIVERSITY JANUARY, 2017
dc.description	Government bond yield is a critical area of knowledge for both bond investors and the government. The rate of return of the government bond is crucially beneficial to the investor, since it is the rate of return on their investment. On the other hand, the government needs to be aware of the trends in its yield to be able to price any new issuance of bonds appropriately. Most developing countries are characterized with ever increasing national budget deficits coupled with rising rates inflations besides escalating interest rates. It is so true that most developing countries are issuing Treasury bonds on monthly basis and the Kenyan government is not exempted from this category. This study had sought to establish the determinants of the Kenyan government bond yields. For the purpose of this study, bond yield is the rate of interest that a bond attracts. This study had the following specific objectives; to establish the effect of a national budget deficit on yield of the Kenyan government bonds, to find out the effect of inflation on yield of the Kenyan government bonds and to assess the effect of interest rates changes on the yield of Kenyan government bonds. This study is of significance to other researchers who will use it as a basis of further research and data governing, fiscal policies makers in the government in deciding on bond pricing and the government bond investors in bond purchasing decisions. This study used secondary data available from the Central Bank of Kenya and the Kenya National Bureau of Statistics. The study adopted a time series analysis research design with regression model. The study had a target population of -Kenyan government bonds that have been in trade from year 1985 -2015. This study adopted regression analysis in order to answer the research questions. This study had sought to establish the degree of association between the determinants considered and government bond yields. Data was analysed using SPSS. Data was presented in frequency tables and inferences made. Finally, conclusions were made on the determinants of Kenyan government bond yields. The study found out that the Stationary R squared of 0.769, 0.661 and 0.653 for the ten, three and one year Kenyan government bond yield respectively. This means that the independent variables (budget deficit, inflation rates and interest rates changes) influence the yield of the ten, three and one year government bond at 76.6%, 66.1 % and 65.3 % respectively when the data is normalized at an ARIMA model. The study recommends bond investors to fully understand the market trends in order to make the right bond purchase decision and the government should benefit in pricing bonds and setting of coupon rates. The study has suggested further studies on determinants of Kenyan bonds with specific emphasis on foreign exchange fluctuations, bond denominations and bond coupon rates.
dc.language	en
dc.subject	Government Bond, Government Bond Yield, Interest Rates, Government Budget Deficit, Inflation Rates.
dc.title	Determinants of Kenyan Goverment Bond Yields
dc.type	Thesis