Vibrant bond market lifts brokers’ earnings

This pales in comparison to a return of 33.6 per cent in the six months to June 2010. 

The number and value of shares traded at the NSE has also dropped in the wake of the August 4 referendum on the Constitution whose successful conclusion was expected to spur increased investor interest on the equities market.

The number of shares traded has dropped from an average of 50 million shares before the vote to an average of 15 million shares.

The daily turnover of shares now ranges between Sh350 million and Sh200 million compared to Sh550 million and Sh750 million before the vote --leaving stockbrokers with reduced commissions and turning the bond market into the new profit driver.

This looks set to intensify demand for bond traders as the market intermediaries race to grow and defend their profits—setting the stage for a battle for talent.

Job Kihumba, executive director at Standard Investment Bank, reckons that the deepening of the bond market could cause scarcity of bond dealer-analysts.

Skilled bond traders and analysts are few given the complexity of bond trading relative to that of the equities market.

“The bond pricing mechanism is usually a complex one and that is where the competitive edge normally is,” Mr Kihumba says.

“However, if the bond market becomes very vibrant than it is currently, then we are likely to experience a shortage of staff who can do the dealing and analysis,” he added.

The two-year poor show of the NSE to 2009 paved the way for increased bond trading as fund managers diversified their portfolios to cushion themselves from the volatile equities market. 

The NSE returned negative returns in 2008 and 2009 because of the weak global and local economies and confidence crisis due to fraud and effects of the 2008 post-election turmoil in Kenya.