Equity and bond markets are essential to creating higher economic efficiency. For strong economic development, a well-functioning financial sector is a critical component. By presenting investment opportunities to local and international savers and financing the government's budget deficit, the Kenyan bond market is crucial to the country's economic growth. The domestic bond market in Kenya, on the other hand, is relatively tiny compared to the rest of the globe, although it is rated third in sub-Sahara Africa in terms of market size. Even in the face of the country's economic difficulties, this market remains crucial for government bonds. Macroeconomic variables were examined in this research to see how they affected the performance of the Kenyan bond market. Specifically, the research intended to examine the impact of interest rate, inflation rate, foreign currency rate, money supply, and equities market performance on bond market performance in Kenya. The analysis found statistically significant positive correlations between interest rates and bond market turnover and between the money supply and bond market development. Exchange rate and bond market development are statistically linked in a negative manner. There is no statistical significance to the correlation between the inflation rate and bond market development. The negative relationship between equity market performance index and bond market development is also established as not statistically significant. On dual causality, equity market performance exhibits dual causality relationships with the bond market performance, Bond market performance has dual causality with interest rates, equity market performance exhibit dual causality with exchange rates, money supply exhibits dual causality with bond market turnover and money supply exhibits dual causality with interest rates. The study recommends that the Government and Regulatory agencies should strengthen the interest rate regulatory framework so as to infuse economic development in diverse sectors of the Kenyan economy. The money supply as a responsibility of the central bank should be modelled to encourage private borrowing, bond market development and credit creation. A proactive approach to controlling macro-economic issues in the economy is also suggested by state and economic planners. Concentrate on factors that worsen corporate bond performance, such rising inflation and changing currency rates. For a longer research period, the paper advises a study using a variety of lagged macroeconomic parameters and the performance of bond markets in a regional context. Research on the impact of industry and company-level characteristics on the performance of corporate bonds should be conducted in the near future. Bond market failure in an economy may be studied in more detail, as can its origins and repercussions. Other emerging regions, such as East Africa, may be included in a research to help these nations create effective policies in the bond market.

show more