Treasury bonds trade falls as CBK mops up shilling

Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG

By CHARLES MWANIKI
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The value of bonds traded in the secondary market at the Nairobi Securities Exchange fell by a fifth in November compared to October, as investors turned their sights to new government debt issues amid reduced liquidity in the money market.

The value of bonds traded fell by 22.5 per cent to Sh46 billion, coming down from the highs of up to Sh87 billion seen in September, when a liquid market had supported both secondary and primary bond trading.

Liquidity has been falling in the market in recent weeks due to mop up activity by the Central Bank of Kenya (CBK) —through the repo market — in a bid to keep a lid on shilling volatility as it weakens against the dollar.

“We attribute this (fall in turnover) to increased investor participation in the primary bond market…and expect trading to remain relatively subdued in December owing to lower market liquidity and the onset of the festive season,” said Sterling Capital in their December fixed income report.

In last month’s Treasury bond sale, investors put up bids worth Sh56 billion against the targeted Sh40 billion, with the government taking up Sh53.7 billion, which was more than ample to cover the month’s maturities of Sh30.7 billion.

This month, the government floated another Sh40 billion bond, whose sale closed on Tuesday, at a time when liquidity remains relatively tight.

Demand for government paper has remained healthy this year partly due to the dearth of alternative investment opportunities in other asset classes, especially equities which have been in the red.