Markets In Focus: Secondary Turnover Spikes 8.57% during The Week

Secondary market turnover increased 8.57 percent w/w to close at 8.33 billion shillings with trades mainly on the medium-to-long end of the yield curve coupled with infrastructure bonds.

The demand in the long-end papers, in the formative days in the week, was informed by the uncertainty ahead of the primary bond auction.

The auction result indicated an overall subscription of 40.39 billion shillings, 80.79 percent performance rate, with CBK accepting 27.59 billion shillings at a weighted average rate of 12.156 percent.

The proceeds of the bond will be geared towards the redemption of the FXD3/2013/5yr, with an outstanding amount of 34.64 billion shillings, which will mature on Monday. However, the primary purpose of the infrastructure bond remains unfulfilled

Shilling Vs The Dollar

The local currency was under immense pressure from heightened greenback demand, hitting a 10-month low of 103.23 before recovering slightly to close at 103.10.

The dollar eased on Friday’s session following remarks by Federal Reserve Vice Chair Richard Clarida hinting US interest rates were close to Fed estimated neutral rate.

Usable foreign exchange reserves held at the central bank declined by USD 89 million to USD 8.06 billion; equivalent to 5.34 months of import cover

Money Market:

The average interbank rate increased by 23bps to 3.28 percent in the week. The regulator intervened in the earlier part of the week to mop-up liquidity totaling 14 billion shillings.

The interbank market still remains imbalanced with the interbank rate touching an intra-week high of 11.00 percent. The weekly volumes traded in the interbank market declined by 46.04 billion shillings to 101.27 billion shillings.

This Week’s Outlook:

FXD3/2013/5yr with an outstanding 34.64 billion shillings is maturing on Monday and is likely to uplift trading at the short-end of the yield curve.

Market analysts anticipate a TAP Sale on the infrastructure bond, IFB1/2018/20yr, to mop-up the rejected cash from the initial auction and also endear to investors who were squeezed out by constrained initial sale period.