Bonds turnover at the Nairobi Securities Exchange (NSE) rose by a fifth in January compared to the same month in 2017, as investors continued to make a strong return to the market following the end of the elections period.
Turnover stood at Sh37.5 billion last month compared to Sh31.2 billion in January 2017. The 20.2 per cent increase, analysts say, is partly due to renewed appetite for infrastructure bonds in the secondary market by investors looking for higher yields.
The higher turnover has also been helped by the liquid market, which has been supported by government payments to agencies, departments and contractors.
Some maturities of existing debt have also found their way into the secondary market, especially with the Central Bank of Kenya unwilling to take up expensive money in primary sales.
“Bonds market turnover is expected to remain high in 2018 as investors’ confidence is revamped following a decline of political noise from last year,” said Kingdom Securities senior analyst Mercyline Kyalo in a note.
As a result of the ample liquidity in the market, the interbank rate has hovered around the 5.3 to 6.5 per cent level in the past two weeks, with volumes transacted also falling.
The bonds market was last year overshadowed by equities, which were on the recovery after a lean two-year period of falling prices.
Bond turnover at the NSE fell by 1.2 per cent last year, to Sh429.5 billion, compared to Sh434.7 billion in 2016. Last month, the equities market turnover at the NSE stood at Sh20 billion, compared to Sh12 billion recorded in January last year.
During the whole of last year, turnover was up 16.5 per cent to Sh171.4 billion. Interest rates on government securities are not expected to rise significantly in the short term.
Institutions such as banks are, however, expected to keep up their buying activity both in the primary and secondary markets as they look for ‘risk-free’ returns in an environment where the rate cap does not allow much room for pricing risk on customer loans.
CBK said in its latest weekly bulletin that it sees continued strong investor appetite in the fixed income market, which reflects growing investor confidence in the segment.