An investor at the NSE. Analysts expect increased activity this month. PHOTO | FILE
What you need to know:
NSE data for the past month show the monthly bond turnover stood at Sh55 billion, up from Sh49.4 billion in July, and Sh28.5 billion in June.
Increase in sales has taken this year’s total traded turnover to Sh332.6 billion, up 3.8 per cent from a comparable period last year.
Analysts expect the increased activity to continue this month, with the yield on the short-term paper forecast to remain flat or move slightly upwards.
An uptick in bond trading at the Nairobi Securities Exchange (NSE) in August partly driven by a shorter settlement cycle pushed year-to-date turnover above a similar period in 2013.
This reversed significant deficit registered over the first seven months of the year. The bond market has been volatile this year amid rising inflation and short supply of securities.
NSE data for the past month show the monthly bond turnover stood at Sh55 billion, up from Sh49.4 billion in July, and Sh28.5 billion in June. Increase in sales has taken this year’s total traded turnover to Sh332.6 billion, up 3.8 per cent from a comparable period last year.
Over the first seven months the bond turnover of Sh277.6 billion was 6.2 per cent down compared to July 2013.
“The increased activity has come following the reduction of the settlement cycle to T+0 (in August), as well as investors who have been looking to lock in capital gains as the rates come down,” said Old Mutual Securities fixed income and equities dealer Bedan Kagunda.
Revival of fortunes for the secondary bonds trade will be welcomed by stockbrokers who earn a commission of 0.035 per cent on exchange (buying and selling), complementing the commission from equities.
With bonds worth Sh452.5 billion traded in the full-year 2013, broker commissions added up to Sh282.8 million before factoring in any discounts that may have been offered to clients.
Secondary market rally has come at a time when the Treasury bill yields have gone down, especially on the shorter end, forcing investors to rush for older bonds to lock in higher rates as lower rates are forecast.
Sh16 billion was offered for each 91, 182 and 365-day Treasury bill in August and according to CBK’s auction results, bids worth Sh6.5 billion for the 91-day, Sh2.8 billion for the 182-day and Sh20.8 billion for the 364-day T-bills were received.
The three and six month notes offered returns of 8.2 and 8.6 per cent respectively and with inflation at 8.36 per cent, investors opted for the one-year offer which had a yield of 10.2 per cent.
Investors normally seek high returns when inflation is rising to compensate for the economy-wide price rise.
Analysts expect the increased activity to continue this month, with the yield on the short-term paper forecast to remain flat or move slightly upwards.
“We expect the bond market to continue to rally in September as confidence in the market remains strong and supported by robust liquidity in the money market,” said Genghis Capital analyst Vinita Kotedia.
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