Infrastructure bond trades push volumes up by 299 per cent at the bourse

The volume of bonds traded last week rose sharply by 299 per cent, with deals transacted going up to 177 from 71 the previous week, according to Central Bank of Kenya (CBK) weekly data.

Investors seeking to lock in high rates targeted the nine-year infrastructure bond (IFB) issued this month that does not attract taxation.

“This is attributed to active trading and sell buy-backs of IFB 1/2016/9 issued on May 23, 2016, that accounted for 68 per cent of all bonds worth Sh30 billion traded in the week,” the CBK statistical bulletin said.

The Sh34 billion bond, which was issued at a coupon rate of 12.5 per cent, traded at 13 per cent yield.

Rich Management CEO Aly-Khan Satchu said the one percentage point policy rate cut plus the implied easing bias by the CBK policy team was the catalyst for the quadrupling of bond action as buyers sought a piece of the action.

CfC Stanbic Bank regional economist Jibran Qureishi said that investors were keen on treasury bills and bonds with falling returns on stocks at the Nairobi Securities Exchange.

“Treasury bills and bonds have seen a lot of activity because there is a general market consensus that it is better to invest in those assets than in equities,” he said.

Mr Qureishi said foreign investors had already factored in the rate cut by CBK in line with inflation and macroeconomic stability.

READ: CBK lowers policy rate for the first time in 9 months

“The equity market has been on the back-foot for most of the year but the All Share is down less than one per cent. The ones that are doing well are doing real good, the ones doing bad are doing real bad. I think the equity market is oversold now and overdue for a rebound,” Mr Satchu said.