Christmas mood hits bonds trade

Secondary market trading of the fixed-income securities plunged by a third last week as market players predicted further drop this week on the back of a closure of books by institutional investors.

An analysis by Genghis Capital showed the turnover fell by 32.1 percent in the week ending last Friday to close at Sh4.77 billion with various bonds traded on the Nairobi Securities Exchange.

“Secondary market turnover retreated 32.1 percent week-on-week to close at Sh4.77 billion with executed trades cutting across the whole spectrum of the yield curve,” said Genghis Capital. The holiday mood and the tight liquidity experienced in the past week were also seen as factors informing the reduction in turnover in the bond market. The analysts said the market turnover is likely to remain subdued or low for the rest of the year.

“We expect activity to remain subdued with the holiday mood setting in, coupled with the tight liquidity we have been witnessing in the market. Most institutional investors have already closed their books and will remain quiet over the remaining course of the year, which should impact trading significantly in the next couple of weeks,” said Genghis Capital.

Even the recent 20-year bond was undersubscribed, which the analysts attributed to the holiday mood and low liquidity. The bids received totalled Sh28.9 billion with the Central Bank of Kenya — as the fiscal agent of the Treasury — accepting Sh26.2 billion of the Sh40.0 billion issued at an average of 12.5 per cent.

“Auction results for the FXD2/2018/20 were released during the week, and as predicted, the paper was under-subscribed, with a subscription rate of 72.2 per cent,” said Genghis.