Your Bond Has Matured. Is 18% Return on Your Investments Still a Realistic Target?

The lesson from 2024, when interest rates and concern about Kenya's sovereign risk were high, is not to expect 18% returns, but to recognize that returns change as market conditions change. Writes Jacqueline Thuku, CFA, Portfolio Manager at Jubilee Asset Management. 

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For thousands of Kenyan investors, the maturity of a government bond can feel like a success that creates an immediate question: what should this money do next?

That question is especially relevant as substantial government bonds mature and coupon payments return billions of shillings to investors. The instinct may be to search for another bond offering the kind of return investors became accustomed to when yields approached 18 percent in 2024.

Those unusually high returns were not free money. They were driven by high interest rates, pressure on the shilling and concern about Kenya’s sovereign risk. Those macroeconomic conditions have changed and so should the way investors think about reinvestment. 

The better question is not, “Where can I get the same return?” It is, “What is my next investment objective for this money?”

A 12% return today is not necessarily less attractive than an 18% return two years ago. Returns should be assessed in the context of inflation, taxes, liquidity, currency movements and risk.

There is no single best option as each investment serves a different purpose.