The fixed income market closed on Thursday having traded 1.7 billion shillings up from 1.5 billion shillings the previous day, with turnover concentrated on the short end and infrastructure bonds.
Sentiment on the medium-term part of the yield curve remains uncertain, as the market waits to see if the CBK will announce a tax sale on the recently issued bonds. However, the recently closed auction has left the market deflated with the regulator’s management of the yields at a tangent with market forces leaving little trading opportunities in the market. The treasury remains behind on the borrowing target having been left in a net repayment position of 12 billion shillings from this auction, but with the T-bill subscriptions still outperforming, it leaves them with options to close the gap before the end of the financial year.
In other market news, Diamond Trust Bank of Kenya released 1Q17 numbers, with a notable 8.8 percent y/y uptick in PAT, bucking the 1Q17 profitability trend in the banking sector so far. Net interest income was relatively flat (0.8% y/y) on higher income from government securities ( 39.7% y/y). Similar to COOP, interest expenses declined though by a marginal 1.2%. Loss provisioning was down 28.3% despite 17.2% rise in non-performing loans. Currently, the counter trades at an attractive P/B multiple of 0.94x against sector’s 1.1x.