Treasury & CBK Disagree Over New Bond Trading Platform EABX

Kenya’s Treasury and the Central Bank of Kenya (CBK) disagree over the newly established bond trading platform, the East African Bond Exchange (EABX), which successfully welcomed its license to operate from the Capital Markets Authority in February 2023.

The Treasury has showed full support to EABX which it regards as an alternative to the Nairobi Securities Exchange (NSE). The CBK on the other hand, disputed launching the new bond trading platform, denying it electronic access to the central securities depository. CBK claims that EABX distorts market through double pricing of bonds.

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The Treasury’s support for EABX is rooted in a 2009 agreement among industry stakeholders to establish a self-regulating organization for the fixed income market, aiming to enhance trading transparency and efficiency.

CBK’s resistance stems from concerns about dual pricing and yield curve complications, which could jeopardize market stability, while EABX promoters, including commercial banks, expect more liquidity and direct trader interaction.

This power struggle between the Treasury and the CBK also includes proposed legal amendments that would change the structure of Kenya’s debt market by moving the issuance of government securities from the CBK to the Treasury’s Public Debt Management Office (PDMO).

Will this push for a parallel bond market ultimately benefit investors or create unforeseen risks? How will the evolving roles of key institutions impact investor confidence and the overall health of Kenya’s financial ecosystem?