Treasury payments push up bond sales 60 percent

Bonds turnover at the Nairobi Securities Exchange (NSE) jumped 59 percent in May compared to April as ample liquidity in the money market supported trading.

NSE data shows turnover stood at Sh46.6 billion last month, compared to Sh29.3 billion in April.

Ample liquidity also resulted in higher bid volumes on primary security auctions by Central Bank of Kenya (CBK), where the Treasury bill subscription rate rose to 104 percent compared to 73 percent in April.

“The oversubscription was attributable to high liquidity in the money markets during the month supported by government payments,” said Cytonn Investments in its monthly markets review for May.

In the first five months of the year, investors traded bonds worth Sh233.9 billion, which trails the Sh285.9 billion for similar period last year.

In the first half of 2019, the market had seen heavy trading supported by maturities of government securities that saw investors turning to the secondary market in search of rollover opportunities.

This year, there is also the Covid-19 factor that has depressed returns in other investment classes, particularly equities, thus making the fixed income alternative increasingly attractive.

Some of the price falls can be attributed to the foreign selloff that was seen in the market as investors sought to push money to safer jurisdictions and investment classes.

A minor recovery led by large blue chips helped the market come off 17-year lows seen in late March, but prices moderated as investors cashed in.

Equities turnover stood at Sh14.56 billion last month, compared to Sh12.61 billion in April, with activity on large counters going up on profit taking.

The higher traded volumes for both equities and bonds are a positive for market intermediaries though, since they translate to higher commissions.

They earn a maximum of 1.78 percent per equities trade, and 0.003 percent for a bond trade — which is also shared with the market regulator CMA, the CDSC and the NSE.

The intermediaries also earn from advisory work but due to the reduced business, this line might not yield much this year.