Listed bonds turnover at NSE declines 14pc in first quarter on tougher times


Nairobi Securities Exchange on the trading floor of the Exchange building in Nairobi. FILE PHOTO | NMG

The traded turnover of bonds listed at the Nairobi Securities Exchange (NSE) fell 14.9 percent year-on-year in the first quarter of 2023 from the same comparative period last year, the latest data from the markets regulator show.

Investors traded bonds worth Sh162.51 billion in the period, down from Sh190.9 billion in the first quarter of last year, reflecting tighter monetary conditions in the country.

The Capital Markets Authority (CMA) says the drop has been attributed to slower economic growth, insufficient investment growth and macroeconomic instability, which have affected the region’s capital markets performance.

High inflation has seen the Central Bank “tighten policy at an unusually rapid pace amid unfavourable global financial conditions and high debt levels.”

“In the secondary bonds market, bond turnover increased by 2.7 per cent from the previous last quarter of 2022 that recorded a turnover of Sh158.3 billion. This was, however, a 14.9 percent year-on-year reduction from a bond turnover of Sh190.95 billion recorded in the same quarter 2022,” said CMA chief executive officer Wyckliffe Shamiah.

Fixed-income securities faced upward yield pressure amid rising inflation, with the CBK’s unwillingness to take up expensive offers resulting in low-performance levels of recent bonds.

Many investors were therefore unwilling to sell their bonds in the secondary market due to the prospect of taking a hit on prices due to rising yields—effectively opting to hold on to their bonds to avoid actualising the paper losses.

Bond prices move inversely to interest rates, implying that as rates rise, bonds lose value and as rates decline, bonds rise in value.

The decline in bond values has been a result of a rise in interest rates in global markets as central banks try to contain inflation induced by rising oil prices and supply chain disruption due to the Russia-Ukraine war.

The primary market also recorded below-par performance in the quarter, largely on account of investors shying away from longer-dated papers due to anticipation that rates will go up in the short term to reflect higher borrowing needs by the government.

In the period, the government issued eight new bond tranches to the public targeting to raise Sh190 billion—comprising three re-opened bonds, two new issues, and three tap sales.

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