Monthly bonds turnover at the Nairobi Securities Exchange (NSE) fell to Sh35.8 billion in October, the lowest level this year as rate cap uncertainties and investor attention on the Sh60 billion infrastructure bond float took centre stage.
Turnover in the bonds market has in the past three months held below Sh50 billion, coming off the six-year high of Sh84.7 billion seen in July.
Last month, the Treasury floated a Sh60 billion infrastructure bond that attracted heavy investor interest with bids worth Sh86.9 billion, out of which the government took up Sh68.5 billion.
Investors whose bids were rejected turned to the secondary market in a bid to take a position in the paper, meaning that nearly half of the October turnover was realised in the last week of the month.
“Total volumes traded in the Treasury bonds market shot up by 567.85 percent week on week to Sh18.47 billion during the week ending November 1, 2019 – attributed to trades from the newly issued Infrastructure bond. The number of trades also increased by 295 to 531 trades,” said Standard Investment Bank in a fixed income market report.
Uncertainty over the fate of the rate cap has also played a part in the fall in trading over the past three months.
Following the publication of the Finance Bill 2019 in July which has subsequently led to a full repeal of the law, investors were left undecided on where to put their money due to the potential effect of the change on the yield curve.
This persisted through August, September and last month after MPs rejected the repeal clause, only for President Uhuru Kenyatta to send the Bill back to the House asking for reinstatement.
MPs were unable to defeat the President’s memorandum Tuesday.
While the expectation is that the scrapping of the cap may result in upward pressure on the yield curve, analysts at NCBA say high liquidity could still limit the return demands of investors.