Investigations
NSSF Caught in Shadowy Bond Trading Scam

A letter by the Central Bank of Kenya (CBK) to the Capital Markets Authority (CMA) has set off alarm bells in the financial world. The letter, penned by CBK’s Director of Financial Markets, David Luusa, calls for a thorough probe into eyebrow-raising bond trades involving the National Social Security Fund (NSSF).
According to the CBK’s letter, which has been making the rounds, NSSF engaged in some eyebrow-raising trading activities from May to July this year. The central bank’s analysis uncovered several red flags. For starters, NSSF was observed purchasing bonds at prices well above the market average. In a baffling twist, they sold these bonds at lower prices only to repurchase them at inflated rates just days later. This trading pattern, labeled ‘illegal’ by the CBK, has left many scratching their heads.
The letter also names some of the players involved, including Humphrey Wachira Gichuru and Pargamon Investment Bank, a recently licensed stockbroking and investment banking firm. The CBK’s call to action urges the CMA to sift through these trades and provide a detailed account to the Central Bank.
To fully unravel the mystery, one needs to dig into the full market data from May to July. This includes examining trades by broker, security, price, and transaction amounts. Key questions remain: Who were the counter-parties? What were their instructions? Which bonds were in play? Market data will reveal whether these trades were managed directly by NSSF or handled by asset managers on their behalf.
When bonds are bought at a premium and sold at a discount only to be repurchased at higher prices, it doesn’t just create a mess—it lines the pockets of market players. It’s clear that some insiders at NSSF may have been working with brokers to generate profit for others at the expense of NSSF.
This scandal exposes broader issues within the bond market, primarily revolving around transparency. Can we truly rely on our yield curve to reflect accurate market prices? It’s no secret that even major banks struggle with conflicting internal pricing reports. Many treasury departments create their own yield curves, and trade reporting delays muddy the waters further.
The East Africa Bond Exchange (EABX), conceived as a market organizer and self-regulatory body, seems more relevant than ever. Despite its establishment nearly four years ago and recent licensing by the CMA, it still faces operational delays due to Central Bank connectivity issues. This sluggishness casts doubt on the Central Bank’s commitment to a transparent and reliable yield curve.
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