Lucrative trade in bonds sparks turf wars and staff flight

Increased trading in bonds has sparked staff movements with an investment bank losing nearly a whole department that specialises in securities.

Faida Investment Bank (FIB) has been on the receiving end lately, losing five staffers including department head, Anthony Munyiri, and his deputy, Laban Githuki, following their sterling performance that saw the firm become one of the leading traders in terms of share of total turnover.

Earlier, experienced bond market trader and analyst Mr Victor Nkiiri had moved from Sterling Investment Bank to CFC Financial Services.

The number of bond market professionals in terms of trading and analysis are not many, causing broker and investment banks to compete and poach the available few.

“If you are looking to recruit staff to do bond dealing and analysis you are likely to get five or six applications. The market is a bit tight as competent bond traders and analysts are a select few,” ABC Capital CEO, Mr Fred Maina, said in a recent interview.

ABC Capital started a bonds desk last August.

Trading desks

Some brokers still do not have bond trading desks.

As at the end of February, secondary market turnover was Sh42 billion against Sh27 billion for January.

The February bond turnover was the highest ever reached in a month in the history of the bourse.

“We could reach Sh90 billion turnover in the secondary bond market by the end of first quarter of the year and probably more than Sh300 billion by the end of the year,” said Mr Nkiiri.

Last December, bond turnover was Sh16 billion which was more than double the December 2008 figure of Sh7 billion.

In fact, the fixed-income market grew in the course of 2008 to the extent that trades in single months were higher than those done in comparative months in the previous years.

Standard Investment Bank executive director, Mr Job Kihumba, said that any further growth in the market could cause scarcity of bond dealer analysts.

“If the bond market becomes very vibrant, we are likely to experience a shortage of staff who can do dealing and analysis. And bond pricing is the basic issue,” he said.

With this year’s secondary trading proving to be quite promising, major realignments in terms of staffing are expected as demand for analysts and dealers who can handle both primary and secondary bond markets rises.

The New Year’s departure of two key staff at FIB seems to have been only the beginning.

FIB chief executive, Mr Bob Karina, was virtually left without a department as he was forced to reconstitute one.

Mr Karina said the five staffers gave him a two-week notice.

“It came as a surprise. They took everybody including the clerk. I was given a two-week notice. It was sad,” he said.

Working well

He explained that he developed the team to a point where it was the envy of the rest of the brokerage community.

“I have already reconstituted the department and everything is working out well,” he said.

In an earlier interview published last November, Mr Karina said the problem in hiring bond trading staff could be resolved by training equities dealers into bonds traders and analysts.

“We have been trading in bonds for the last two years. Most securities dealers can be transformed into bond traders,” Mr Karina had said.

The situation in the hiring market for bond traders has been made acute by the fact that investment bankers and stockbrokers are also competing with treasury departments of commercial banks, which have been quite aggressive and better placed in terms of infrastructure.

Specifically, banks find it easier to carry out a trade and settle it, meaning that cash changes hands almost instantly.

This is possible because they have well established payment systems through the electronic SWIFT that is linked to the Central Bank of Kenya — which issues treasury bonds on behalf of the government.

Mr Maina had said that an experience of between two and three years in the field of bond trading and analysis was essential.

However, most experts with such credentials are already engaged by brokerage houses, investment banks and treasury departments of commercial banks which transact fixed-income securities, mainly T-bills and bonds.