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Zawya
01-08-2025
- Business
- Zawya
Kenya's bond market shake-up plan rattles brokers
A plan by the Central Bank of Kenya (CBK) to prioritise commercial banks in the trading of Treasury bonds has sent fears among brokers and investment managers. This is because market intermediaries fear the proposed reforms could sideline them, jeopardising both their relevance and vital revenue streams. At the heart of the proposed changes is a move to shift Treasury bond trading from the Nairobi Securities Exchange (NSE) to a CBK-owned platform. This new system would designate a select group of top commercial banks as market makers, entrusting them with holding these bonds and consistently quoting both buying and selling prices. Commercial banks already hold the largest share of government-issued Treasury bonds and boast significant liquidity, making them prime candidates for this market-making role, as they can readily settle quoted prices. The Nairobi Securities Exchange said it is carefully reviewing the proposed guidelines. Frank Mwiti, the NSE's Chief Executive, expressed hope that any bond market reform would be implemented through a consultative process.'We are reviewing the guidelines to understand them so that it is much easier to really see what the implications are, and that conversation is happening at the capital markets round table,' Mwiti said. 'I think that the best way to develop the market is through consultations.'Market intermediaries argue that the existing formal market on the NSE fosters effective price discovery. It brings together a diverse array of investors—including foreigners, insurance companies, pension funds, institutional investors, and high net-worth individuals—who hold differing perceptions on interest rate direction. This dynamic, they contend, leads to a more robust market mechanism than one controlled by a select group of institutions. The CBK's draft over-the-counter (OTC) guidelines for the government securities market aim to shift bond trading from the Nairobi bourse to CBK-owned platforms, largely controlled by foreign entities like Bloomberg and Refinitiv. This proposed shift is expected to directly hurt market intermediaries through lost revenues; stockbrokers typically charge a 0.03 percent commission per bond trade, while the NSE levies 0.1 percent of the bond's value. The central bank states that these new institutional arrangements for an OTC market are intended to address challenges in pre-trade price discovery, improve market liquidity, and enhance transparency. Under the proposed system, dealers would confirm trades on Bloomberg's E-Bond and Refinitiv trading platforms, which are linked to the CBK's government bond settlement system called DhowCSD. Market makers, central to the CBK's plan, are individuals and firms that consistently participate in the market, buying and selling securities to provide liquidity and ensure investors can trade quickly and at fair prices. They profit from the difference between their quoted buy and sell prices. This ambitious government bond market reform plan is backed by the International Monetary Fund (IMF) and World Bank. It targets heavily capitalised, CBK-licensed banks to serve as market makers by consistently providing two-way quotes for Treasury bonds. The outcome of this tug-of-war will significantly shape the future of Kenya's financial markets and the cost of government borrowing. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
CBS News
31-07-2025
- Business
- CBS News
Should you roll over your 401(k) to an annuity this August?
Today's uncertain economic environment, dotted by sticky inflation, high interest rates and market volatility, has many pre-retirees rethinking their long-term financial strategy. And, if you're sitting on a sizable 401(k) balance, you might also be wondering whether now is the right time to shift gears. For some, that means converting a portion of their retirement savings into a guaranteed income stream, such as an annuity. After all, predictable monthly income can be a welcome buffer against inflation and market swings. But making a substantial move, like rolling over your 401(k) to an annuity, isn't a good decision for every soon-to-be retiree. Doing so can offer long-term security, but it can also limit your flexibility and tie up your funds in ways that might not align with your goals. This is especially relevant now, as annuity rates have remained high amid the Federal Reserve's extended rate pause, but so have rates on other fixed-income investments, like certificates of deposit (CDs) and Treasury bonds. So, how do you know if this August is the right time to take the plunge and roll over your 401(k) balance to an annuity? Below, we'll take a look at what you need to know before making that move, along with some key considerations that can help you determine if it makes sense for your retirement plan. Find the right annuity to help meet your retirement goals today. Converting a 401(k) into an annuity can make sense in some situations, especially if your primary retirement goal is to secure a steady income that lasts for life. With interest rates still elevated, many types of annuities are offering more attractive payout rates than they have in recent years. That means your rollover dollars could now generate higher monthly income with an annuity than if you made the move in a different climate. And, with stock market volatility remaining a concern in the current economic landscape, some retirees and near-retirees are looking for ways to protect their nest eggs from downturns, which is where fixed annuities, in particular, come in. This type of annuity can provide principal protection and peace of mind, which can be hard to come by if your 401(k) is invested primarily in stocks or mutual funds. That said, rolling over your entire 401(k) into an annuity isn't always the best approach. These unique insurance products tend to come with fees, surrender charges and limited liquidity. Once your money is in an annuity, it's often locked in for years, and getting it out early could cost you. And, if you're still relatively young or want more control over your investments, moving a large portion (or all) of your retirement funds into an annuity may limit your growth potential. If you're still employed, there's also a chance that this isn't an option. Not all 401(k) plans allow rollovers while you're working, so you may need to wait until retirement or a job change before this becomes available. In short, while current conditions may make annuities more appealing than they were in the recent past, a rollover should be part of a broader retirement income strategy, not a standalone solution. Learn more about how an annuity offers you guaranteed income during retirement. If you're considering this type of rollover, start by thinking about your retirement income needs. Ask yourself: Do I have enough in Social Security and other sources to cover my basic expenses? Or would a guaranteed income stream from an annuity help fill the gap? You'll also want to consider your tolerance for market risk. If you're risk-averse and don't want to worry about portfolio performance in retirement, an annuity could offer a helpful safeguard. Some people choose to roll over just part of their 401(k) — generally enough to purchase an annuity that covers their core expenses — while keeping the rest invested for growth or flexibility. Another factor to consider is how close you are to retirement. If you're within five years of retiring, locking in current annuity rates could work in your favor, especially if you anticipate rates dropping again soon. On the other hand, if you're younger, your money may have more earning potential if left in a well-diversified portfolio. You should also evaluate the type of annuity you're considering. Immediate annuities start paying income right away, while deferred annuities build value over time. Fixed annuities offer predictable payouts, while variable annuities carry market exposure and typically higher fees. The right option generally depends on your timeline, risk tolerance and income needs. If you still aren't sure, consider meeting with a trusted financial advisor or retirement planner. These experts can help you crunch the numbers and map out whether rolling your 401(k) into an annuity makes sense for your specific goals. Rolling over your 401(k) into an annuity this August might make sense, especially if you're looking to lock in higher payouts, protect your principal or create guaranteed income for retirement. But doing so is not the right move for everyone, and the timing alone shouldn't drive your decision. So, before making any changes, take a close look at your retirement needs, investment goals and overall financial picture. A partial rollover may offer the best of both worlds — security and flexibility — but every retirement plan is different, and it's important to build a strategy that fits your life, not just the current market.
Forbes
31-07-2025
- Business
- Forbes
Trump Administration Debt Strategy Is More Confusion And Uncertainty
President Donald Trump and Treasury Secretary Scott Bessent appear to be pushing a new approach to Treasury bond sales. However, what is supposed to be new seems similar to what was done by Janet Yellen during the Biden administration: pushing short-term bonds over long-term ones. As the Wall Street Journal reported, the administration said it would delay issuance of longer-term bonds until yields fell. The likely rationale is secondary budget control of debt expenses. Annual debt service for the U.S. is currently more expensive than any discretionary budget category, including defense spending. 'What I'm going to do is I'm going to go very short-term,' Trump had said in June, according to the Journal. 'Wait until this guy [Fed Chair Jerome Powell] gets out, get the rates way down, and then go long-term.' The federal budget deficit is approximately $2 trillion annually. To support the deficit spending, the government must sell enough debt to cover it. The debt varies in length from far less than a month to 30-year bonds. The Treasury uses different mixes of securities to maintain the balance. Shorter-term Treasurys shorten the interest payment obligations and is usually cheaper, at least when the yield curve isn't inverted and longer-term bonds have higher yields. But shorter-term also means space for volatility and a jump in costs if inflation increases. Longer-term Treasurys allow the government to space out the debt obligations and lock in rates, but the costs are higher. The mix typically is set and relatively consistent, so investors know what to expect. The Trump administration plans to announce on Wednesday, July 29, the mix of lengths. 'It is disingenuous to suggest this Administration is deviating from longstanding debt management practices when Treasury's auction sizes and market guidance have not changed since the last Administration,' Deputy Treasury Secretary Michael Faulkender said in a written statement, the Journal noted. But whether a Trump or Biden administration, the strategy has become to pull back from higher levels of long-term bond sales. Bessent, a former hedge fund manager, was a regular critic of the former administration and its Treasury Secretary Yellen for holding down sales of longer-maturity Treasurys, which affect longer-term rates for house mortgages and commercial borrowing, as Bloomberg reported in February 2025. Currently, the combination of concern about inflation, tariff uncertainty, levels of national debt, and questions about the independence of the Feb are pushing investors to demand higher yields on the 10-year. Bessent has said that the administration wants to push down yields on longer-term Treasury debt. So far, strategies haven't delivered. That potentially increases the amount of uncertainty the country's economy has been facing. Announcement of tariff deals would seem to help reverse the trend of confusion, but they only appear to mask it. Jorge Liboreiro, a reporter at Euronews, posted an analysis on the White House's fact-sheet about the US-EU trade deal that, as he notes, 'with claims that directly contradict the European Commission's version of events.' One example is that the White House touts a $600 billion U.S. investment 'pledge' that the EU clarifies as an 'intention,' not pledge. There is no deal on EU purchase of U.S. military equipment. There was no concession on food safety and sanitary certificates for U.S. pork and dairy products. Such redefinitions are more examples of sweeping problems under the rug. Even if portions of the public are reassured, investors and institutions with fiscal muscle that can affect the economy are likely not.
Bloomberg
08-07-2025
- Business
- Bloomberg
Treasury Bulls Unwind Big Bets as Strong Data Pushes Yields Up
Futures traders have been unwinding some large bullish bets on Treasury bonds, adding to the recent upward pressure on US yields after a surprisingly strong jobs report last week. Traders had built up substantial long positions in Treasury markets ahead of Thursday's payrolls data, anticipating that a weak reading would bolster the case for lower rates.
Yahoo
28-06-2025
- Business
- Yahoo
Robert Kiyosaki Warns That Bonds Aren't ‘Safe' — Do Experts Agree?
Recently, the writer of 'Rich Dad, Poor Dad' Robert Kiyosaki posted on X that 'only chumps' would believe bonds are a safe investment. Kiyosaki went on to say that bonds come with counter-party risk and that the only truly safe investments are gold, silver and Bitcoin. Kiyosaki called everything else 'toilet paper.' Discover Next: Read Next: Is this true? GOBankingRates reached out to other financial experts to find out their takes on Kiyosaki's statements. Read on to see what the consensus is on whether bonds are a safe investment or not. Kiyosaki's statement about bonds doesn't take into account the different types of bonds. 'Not all bonds are created equal,' explained Drew Stevens, president of Wisdom to Wealth. 'Treasuries, municipal and corporate bonds serve different purposes and react differently to market stressors.' Treasury bonds are issued by the U.S. government, so their value is guaranteed so long as their government is standing, but the interest they deliver may waver if interest rates rise (which they have been doing). These are the types of bonds Kiyosaki is likely referring to in his argument. Trending Now: Municipal bonds are issued by state and local governments. They also offer appealing rates to investors. However, if the government were to go bankrupt, then the bond's value is not guaranteed. Corporate bonds are issued by businesses. The value of these, as you might have guessed, really depends on the strength of the corporation that issued them. However, because of this inherent risk, the ultimate yield can sometimes be extremely high in comparison with the other bonds. If passed in its current state, President Donald Trump's 'One Big Beautiful Bill' would add $2.4 trillion to the deficit. Financial expert and strategist David Lester said that amount of debt might cost bond investors — specifically treasury bonds. 'As U.S. debt increases, lenders — including foreign governments and institutional investors — may begin demanding higher yields to compensate for the perceived risk,' Lester said. 'Should that happen, older treasury bonds offering lower yields could lose appeal, as new issuances offer more competitive rates. So Robert is most likely correct about staying away from bonds if the bill passes.' If investors want to look into bonds, one option that would be protected against the mounting national debt is an inflation-protected bond. 'These instruments adjust both the principal and the interest with the consumer price index, so the real value of the payment stream stays intact,' explained Sami Andreani, finance expert and chief financial officer at Oppizi. 'The trade-off is a smaller starting yield, yet many households decide the shield against inflation is worth the lower current income.' The majority of experts agreed that bonds should just be one piece of your financial portfolio. 'Labeling all bonds as 'unsafe' is a sweeping generalization,' Stevens said. 'Bonds, like any asset class, require context and strategy. When used properly, they can still play a critical role in portfolio diversification and capital preservation, especially for conservative investors or those nearing retirement.' Noam Korbl is a personal finance expert in addition to co-founder and chief operating officer at PropFirms. Korbl stressed that bonds are not meant to be a some get-rich-quick scheme, but rather a tool to weather volatility in shaky markets. 'In the last decade, even through inflation and central bank shifts, treasury bonds have delivered average annual returns around 3% to 4%, depending on duration. That might not impress crypto enthusiasts, but for pension funds and people nearing retirement, that consistency matters,' Korbl explained. Korbl added that bonds come with many tax advantages as well. 'In certain states like Florida or Texas where state income tax is zero, interest from federal bonds comes in clean. Municipal bonds go even further with triple-tax-free status in the state they're issued,' Korbl said. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 6 Big Shakeups Coming to Social Security in 2025 The 5 Car Brands Named the Least Reliable of 2025 This article originally appeared on Robert Kiyosaki Warns That Bonds Aren't 'Safe' — Do Experts Agree?
