@museveni. So according to the Public Finance Management Act 2012 a Public Debt Management Office (PDMO) will be setup under Treasury. One of the goals will be to build capacity and competence of the PDMO staff and equip them with new skills in areas such as evaluation of risks in guarantees and GoK contingent liabilities. Also contribute in the preparation of regulations for debt management operations both for the Central Government and the County Governments. In relation to County Government borrowing, prescribe the responsibility of the PDMO. The current initatives include the implmentation of the Treasury Mobile Direct project to enable sale of government securities through mobile phones and plans to put in place a National Central Depository System for all securities to facilitate efficient secondary market trading.
So eventually there will be a custodian for bonds outside of CBK and Treasury and your mobile phone will be key. Soon the PDMO will also decide how the bond traders and investors at large will interact with the county governments to raise money for their budgets. The scandals over the last few months may essentially be devolved and anyone asking the wrong questions on a county level may just receive the slap of invisibility. But what the article has brought up is the problem with the mentality of bond brokers who have become so competitive that they've forgotten that their business not only relies on capital but reputation. It also shows that once the competition becomes tough more players are recruited starting from bankers to cbk employees maybe to governors next.
How could the rogue cbk employee sell bonds to traders without the traders knowing about it? It wouldn't make sense because he wouldn't have profited from it so then the punishment isn't excessive. But it's the "extremely informal" market making that should receive more debate as it's creating a get-rich-quick culture that takes away from the fundamental nature of fixed income. And it's attracting more and more novice traders and greedy investors who want to make supernormal profit.
The arbitrage account is ok if the users of those facilities also book losses when they occur but one often finds these problems are passed to innocent buyers (sometimes through failed buy-backs). The result is that confidence is eroded and good hearted traders get fired. The margin trading policy needs to hold brokers accountable to their trading strategy. In this way everything is more transparent. The bigger picture here is to grow a bond market with little regulation.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden