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How Did Government Bonds Perform In October?

BY Soko Directory Team · November 7, 2022 09:11 am

KEY POINTS

The weighted average rate of accepted bids for the October bonds was 13.8 percent, 0.2 percentage points lower than the 14.0 percent average rate for the September bonds.

KEY TAKEAWAYS

The yields on the government securities increased during the month compared to the same period in 2021, partly attributable to the increased perceived risks arising from increasing inflationary pressures and local currency depreciation.

The October 2022 bonds remained undersubscribed, with FXD1/2017/10 and FXD1/2020/15 receiving bids worth 18.8 billion shillings against the offered 40.0 billion shillings.

The performance translated to a subscription rate of 47.0 percent while FXD1/2022/25 received bids worth 14.9 billion shillings against the offered 20.0 billion shillings, translating to a subscription rate of 74.5 percent.

The weighted average rate of accepted bids for the October bonds was 13.8 percent, 0.2 percentage points lower than the 14.0 percent average rate for the September bonds.

The table below provides more details on the bonds issued during the month of October:

Bonds

Secondary Bond Market: 

The yields on the government securities increased during the month compared to the same period in 2021, partly attributable to the increased perceived risks arising from increasing inflationary pressures and local currency depreciation.

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

Bonds

The secondary bond turnover declined by 12.3 percent to 57.6 billion shillings, from 66.4 billion shillings recorded in September 2022, pointing toward reduced activity by commercial banks in the secondary bonds market.

On a year-on-year basis, the bonds turnover declined by 21.1 percent to 634.4 billion shillings, from 803.9 billion shillings worth of treasury bonds transacted over a similar period last year.

Rates in the Fixed Income market have remained relatively stable due to the relatively ample liquidity in the money market.

The government is 21.2 percent behind its prorated borrowing target of 203.0 billion shillings having borrowed 160.0 billion shillings of the Kshs 581.7 bn borrowing target for the FY’2022/2023.

“We expect sustained gradual economic recovery as evidenced by the revenue collections of 486.0 billion shillings in the FY’2022/2023, equivalent to 22.7 percent of its target of 2.1 trillion. Despite the performance, we believe that the projected budget deficit of 6.2 percent is relatively ambitious given the downside risks and deteriorating business environment occasioned by high inflationary pressures,” said Cytonn Investments.

Related Content: How To Start Buying GoK Bonds, Investing In Stocks, And Building Emergency Funds

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