Bonds turnover at the Nairobi Securities Exchange (NSE) rose 11.2 per cent in May as investors channelled excess funds into the secondary market due to limited uptake of bids in primary auctions by the Central Bank of Kenya.
Market data compiled by Cytonn Investments shows that the bonds turnover stood at Sh44.8 billion last month compared to Sh40.3 billion in April, with the volumes expected to rise further this month due to easing liquidity in the market.
Analysts say that with yields on bonds remaining relatively stable last month, investors were able to eke out some gains in price, which made the securities attractive.
“The yields on government securities in the secondary market remained relatively stable during the month as the Central Bank of Kenya (CBK) continued to reject expensive bids in the primary market. According to the FTSE NSE Bond Index, Treasury bonds listed at the NSE gained 1.4 per cent in May, bringing the year to date performance to 6.7 per cent,” said Cytonn in its monthly markets report for May.
Bond trading has generally been higher this year compared to 2017, with the turnover of Sh232 billion in the five months to May coming in 21 per cent higher than the trades in the corresponding period in 2017.
In a market that has limited investments offering good returns, investors have turned to bonds, which also offer an added aspect of security when compared to competing investment classes.
An increasingly liquid market also means that funds are finding their way into the secondary market, now that the government has hit its domestic borrowing target before the end of the fiscal year and is therefore unwilling to take up a lot of money in primary auctions.
Some of the excess liquidity may also find its way to the equities market, which also recorded a rise in traded turnover last month to Sh18.4 billion from Sh15.1 billion in April.
Foreign portfolio investors have also been taking a keener interest in the local capital markets and can boost turnover.
The CBK has highlighted that there has been an increase in foreign exchange inflows into the country from these investors in the last few months.