Monthly bond turnover at the Nairobi Securities Exchange (NSE) doubled to Sh37.1 billion in January on higher liquidity, marking a recovery from December when activity dipped to a low of more than 24 months.
Data from the NSE shows the turnover rose from December’s Sh18.23 billion as the market made a gradual recovery after the festive period, which is normally marked by a lull in activity in the capital markets as many funds have closed their books for the year.
The turnover was, however, a drop from Sh50.98 billion transacted in January last year and Sh37.58 billion in a similar period in 2018.
“The year opened with the market quite flushed with liquidity. We saw a lot of interest in short and medium term bonds from locals,” head of fixed income desk at Genghis Capital Kenneth Minjire said.
“But this slowed down considerably once CBK announced that it was issuing a five-year bond. A lot of local investors then pulled out to participate in primary market.”
Mid-January, however, saw foreign investors come to the market heavily to buy infrastructure bonds, leading to a rise in turnover.
CBK’s five-year and 10-year papers that were issued during the month both posted a rise in yields, limiting secondary market activity. The government was looking for Sh50 billion but accepted Sh63.7 billion of Sh69.7 billion bids.
“The subscription was quite heavy but CBK picked almost everything, meaning a lot of investors got the allocations they were looking for. Local participation slowed down after the auction,” noted Mr Minjire. He added that liquidity tightened towards the end of the month since CBK had picked up a lot of money both from primary bond auction and T-bill auction.
The bonds market also benefited from the reduced attraction of the equities market as NASI, NSE 20 and NSE 25 decreased by 2.6 percent, two percent and 1.9 percent, respectively.