Bond Turnover In The Domestic Secondary Market Reverses The Previous’ Weeks Gains

Bond turnover in the domestic secondary market reversed the previous’ weeks gains by 29.73% to KES 10.10bn, from KES 14.37bn recorded the previous week.

Notably, fixed coupon deposit bonds dominated the trading activity for the week, marking a shift from the two consecutive weeks during which infrastructure bonds were the primary focus.

As of November 24th, there has been a notable uptick in the holdings of domestic debt by banking institutions, marking a substantial increase of 185bp to 46.00%, as compared to the 44.15% reported at the close of October – this upward shift deviates from the prolonged downward trend and represents the most substantial m/m increase observed in over two years.

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It is presumed that this increase may be attributed to a heightened allocation to government securities or a reduction in securities classified as “held for sale,” thereby mitigating the impact of rising interest rates on the valuation of their portfolios.

See below a chart showing Kenya’s domestic debt by holder;

In the foreign exchange market, the shilling continued its slide against the dollar, ceding an additional 42 cents, on inability to square out the demand and supply mismatches. On the plus side, the start of the holiday season bodes well for dollar inflows in the coming weeks. Even then, the US dollar index weakened by 0.3% against a basket of currencies during the week ending 30th November 2023.

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The shilling also lost against all the other relevant currencies but gained 0.5% against the Ugandan shilling.

See the chart below for a visual representation;

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