A Nairobi Securities Exchange staff attends to an investor on January 9. PHOTO | FILE
The bond market at the Nairobi Securities Exchange (NSE) saw a lower turnover last month with investors diverting cash into the 12-year Sh25 billion infrastructure bond.
Bonds worth Sh41.5 billion traded, down 5.7 per cent from previous month.
In February, the turnover stood at Sh44 billion but in March there was focus on the primary 12-year infrastructure bond where investors put in bids of nearly Sh52 billion. Many investors spared liquidity for the bond rather than seek deals in the secondary market.
The bond was hugely oversubscribed as it is tax-free with a provision for a partial principal redemption (repayment) during its life.
“People held back on trading in the secondary market because they were sparing liquidity to participate in the infrastructure bond,” said Alexander Muiruri, head of sales and research at Nairobi-based brokerage house Kestrel Capital.
Despite the high liquidity shown by the market in the subscription of the 12-year bond, the yield actually went up by 0.293 points, as the previous similar bond had been issued at a yield of 11.263 per cent.
According to Kestrel Capital data, the most traded bonds in the month were the 10-year issues. A total of 30 per cent of the bond turnover was made through the 10-year bonds, meaning Sh12.45 billion was traded.
Among the reasons for the high trading in the bond was the fact that it had been issued in February and there appeared to be some mis-pricing as it was issued at a lower yield than what was available in the market.
Mr Muiruri said there is a tendency for newly issued bonds to be the focus of the market once they begin trading on the NSE.
“We have seen a lot of trading on the 10-year bond in March because people were seeking to benefit from the capital gains arising from the trading at lower yield than the one at which it was initially issued,” said Mr Muiruri.
The second most traded bonds were the 20-year types taking 26 per cent or Sh10.79 billion of the total turnover for the month.
The infrastructure bonds took 20 per cent of the total turnover for the month.
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