Benchmark Bond Programme and Yield CurveDevelopment in Kenya_Leonard Thotho

Primary and secondary bond market data and Ordinary Least Squares (OLS) and Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) techniques were used to investigate the effect of the benchmark bond programme on the development of the yield curve in Kenya from the year 2000 to 2016. Both simple and multivariate OLS showed that demand for bonds as measured by subscription rate and bid to cover ratios at the primary market were significant determinants of the level and direction of two and five-year benchmark bond yields, and not 10-year bonds.