Secondary Market Turnover Sheds Off 9.90 Percent

Secondary market turnover narrowed 9.90 percent on a week-to-week basis to close at 7.78 billion shillings last week.

The trades were mainly boosted by short and medium-term maturities which have been attributed to banks coupled with pension funds reducing their duration.

The top five bonds accounted for 48.39 percent of the total turnover with the FXD1/2017/2Yr paper emerging as the dominant paper.

Sell buyback transactions accounted for 23.82 percent of the total weekly turnover. The display of the yield curve has been slightly flat between the medium and longer-term space.

“We thus expect the attractiveness of the medium-term papers to hold as opposed to the longer-duration bonds,” said analysts from Genghis Capital.

Liquidity for the medium-term bonds has also improved; seen in the narrowing of the bid-ask spread in that space. Inflation data for the month of April showed a continuation of the disinflation trend with a headline print of 3.73 percent y/y. This has mainly been attributed to the ease of food inflation (mainly base effect).

Nonetheless, fuel inflation pierced past the double-digit mark, recording 10.20 percent y/y in April, propelled upward by the first-round impact of the logging ban with charcoal prices rising 55.30 percent y/y.

The nascent upswing in the business cycle has been signaled by the i). The uptrend in core inflation which rose to 4.00 percent y/y in April and ii). April Purchasing Managers Index (PMI) which ticked a 27-month high of 56.40.