Weekly Wrap: Putting the Secondary Turnover, Shilling and Money Market Into Perspective

Secondary market turnover surged 175.49 percent w/w to close at 16.68 billion shillings with the top five traded papers accounting for 50.87 percent of total trades.

The last week’s activity was buoyed by demand in the short-to-medium term tenors coupled with infrastructure bond papers.

Economic analysts at Genghis Capital attribute the rejection of close to 20 billion shillings at the primary bond auction as the primary driver of the week’s activity.

The Central Bank of Kenya re-opened the FXD2/2018/15Yr seeking to raise 32 billion shillings the first time it has opted for a bond re-opening over a TAP Sale in the month a primary bond auction has been held.

US Dollar Vs Kenyan Shilling

The local currency faced pressure in the week to close at 101.34 shillings against the US dollar which was attributed to end month greenback demand from the corporate sector.

Central Bank report indicates that diaspora remittance flow grew 41.90 percent y/y to USD 2.55 billion in the first eight months of the year.

Usable foreign exchange reserves held at the central bank declined by USD 101Mn to USD 8.31 billion, equivalent to 5.50 months of import cover.

Money Market:

The average interbank rate declined 16bps to 3.57 percent in the week. This was attributed to improved liquidity in the market with the average dropping to 3.05 percent in Friday’s session. The regulator intervened on both sides of the transactions in the course of the week. The weekly volumes traded in the interbank market edged up by 28.32 billion shillings to 105.40 billion shillings.

This Week’s Outlook:

Economic analysts expect demand to remain elevated in the short and intermediate tenors in the course of the week.

Analysts say that they do not foresee appetite on the re-opened FXD2/2018/15Yr paper. The inflation print for the month of October will indicate the build-up in inflationary pressure which is due to a flare-up in fuel inflation.