Government Bond Turnover Down By 30% In October

By Cytonn Investments / Published November 2, 2020 | 8:07 am

Government Securities

In the Month of October, the yields on government securities in the secondary market remained relatively stable and the bond turnover declined by 30.0 percent to 59.3 billion shillings from 83.5 billion shillings recorded last month.

The FTSE NSE bond index increased marginally by 0.5 percent to close the month at 98.2 from 97.7 in September and bringing the YTD return to 2.8 percent.

The chart below is the yield curve movement during the period:

Liquidity

Liquidity in the money markets eased during the month of October with the average interbank rate declining to 2.6 percent, from 3.0 percent recorded in September.

The liquidity was supported by government payments that offset tax remittances.

During the week, the average interbank rate increased by 0.3 percentage points to 2.9 from 2.6 percent recorded the previous week.

The average interbank volumes declined by 24.8 percent to 13.5 billion shillings from 17.9 billion shillings recorded the previous week.

According to the Central Bank of Kenya’s weekly bulletin, commercial banks’ excess reserves came in at 9.5 billion shillings in relation to the 4.25 percent Cash Reserve Ratio.

READ: KRA Waives Presumptive Tax For New Businesses

Kenyan Eurobonds

According to Reuters, the yield on the 10-year Eurobond issued in September 2014 declined by 1.2 percentage points to 5.2 percent in October, from 6.4 percent in September.

This was an indication of improved investor sentiment and the perception of reduced risk by foreign investors on the country’s outlook attributable to the IMF’s upward revision of Kenya’s GDP.

During the month, the yields on the 10 year Eurobond issued in February 2018 declined by 0.9 percentage points to close at 7.5 percent in October, from the 6.6 percent recorded in September.

The 30-year Eurobond, on the other hand, also declined by 0.5 percentage points to close at 8.2 percent in October, from the 8.7 percent recorded in September.

During the week, the yield on the 10-year Eurobond declined marginally by 0.3 percentage points to close at 6.6 percent from 6.9 percent recorded the previous week.

The 30-year Eurobond declined marginally by 0.2 percentage points to 8.2 percent from 8.4 percent recorded the previous week.

During the month, the yields on the 2019 issued dual-tranche Eurobond with 7-years declined by 1.2 percentage points to 6.2 percent in October, from 7.4 percent in September. The 12-year Eurobond declined by 0.8 percentage points to 7.4 percent in October, from 8.2 percent in September.

During the week, the yields on both the 7-year and 12-year Eurobonds decreased by 0.3 percentage points and 0.2 points to 6.2 and 7.4 percent respectively, from 6.5 and 7.6 percent recorded the previous week.

READ: Yield On Kenyan Eurobonds Dip As Investor Confidence Returns