Bonds trading in the secondary market at the Nairobi Securities Exchange (NSE) nearly ground to a halt on Monday as stockbrokers instead raced to register clients on the new Central Bank of Kenya’s (CBK) depository, which will facilitate all new bond purchases going forward.
Trading data from the NSE showed that there was only one deal concluded on Monday on its bonds platform, a Sh37.6 million transaction involving the June 2023 seven-year infrastructure bond.
On Friday, investors had traded Sh3.97 billion worth of bonds at the NSE from 120 deals, which was above the daily traded average of Sh2.7 billion during the month of July.
The dip on Monday, traders told the Business Daily, was anticipated due to the scale of introducing a new platform in an asset class that moves hundreds of billions of shillings a year and involves thousands of retail and institutional investors. They added that normalcy should begin to return to the market by Wednesday.
The dip in turnover hit the daily fees earned by stockbrokers, who are paid 0.03 percent per bond trade as commission.
They also earn commissions for facilitating clients who use their services to access primary bond sales.
The CBK’s new central securities depository, known as CBK DhowCSD, went live on Monday, and will now be the main onboarding point for new bond investors as well as for purchasing securities in the primary market.
Existing account holders, whose details have been pre-populated on the new platform, also need to set up accounts to access log-in credentials and passwords.
The focus of the new depository is seen as the primary bonds and Treasury bills market, which the Treasury and CBK have been looking to make more efficient and accessible, especially for retail investors.
It is expected that by opening up the market to more investors, the government will be able to access domestic debt at a lower cost, while also deepening the transparency in the segment and boosting the volume of savings in the economy.
The platform is also expected to open a more convenient avenue for the diaspora to buy government debt, with the CBK anticipating that it can tap more than Sh412 billion ($2.9 billion) from Kenyans abroad, who last year remitted a total of $4 billion (Sh569 billion) to the country.
The first test for the new platform will be this week’s Sh24 billion Treasury bills auction, and it will also be hosting the sale of this month’s Sh40 billion, two-tranche bond whose sale started on Monday and will run until August 16.
Work on the platform, funded by the World Bank Group, started around September 2020 and was expected to go live in June 2022.