Secondary market turnover retreated 39.1 percent on a week-to-week basis to close at KES 7.67Bn with executed trades cutting across the whole spectrum of the yield curve.
The top five traded bonds accounted for 58.6% of the total activity of the week’s turnover. The market ended the week on a subdued note, as the bid-ask spread widened, signaling uncertainty in the market around this month’s auction and the pressure the shilling has seen over the last two weeks.
The Consultative Forum for Domestic Debt sat during the week and has consequently issued an amortized infrastructure bond (IFB 1/2018/20) with a coupon of 11.95 percent.
Market analysts believe retreat is partly in a bid to attract foreign inflows to stem the assault on the local unit, which closed the week under pressure, at 102.26.
USDKES:
The local currency was under pressure during the week, especially at the tail end, closing at a high of 102.26, having depreciated by 0.8 percent on a week-to-week basis.
The pressure on the local unit was primarily driven by heavy dollar demand from merchandise and oil importers which offset foreign inflows and diaspora remittances. Usable foreign exchange reserves held at the central bank declined by USD 69 million to USD 8.15 billion; equivalent to 5.40 months of import cover.
Money Market:
The average interbank rate rose 38bps to 3.05 percent in the week. Despite this, the interbank market remained relatively liquid partly due to increased government payments, with the average volumes growing 29.6 percent during the week to 29.5 billion shillings.
This Week’s Outlook:
Market analysts from Genghis Capital still expect interest to remain at the short and medium term tenor bonds which are heavily bid.
Additionally, they also expect to see interest in the 20-year infrastructure bond (11.95% coupon), as IFB issues have been well bid in the past (tax-free, with investors loading premiums superior to FXD issues), with the most recent IFB issue receiving a 139.4% subscription.