Monthly bond turnover at the Nairobi Securities Exchange (NSE) rose to a six-year high of Sh69.8 billion in June, buoyed by a liquid market that saw investors turn to the secondary market in search of yields.
NSE data shows the turnover rose 28 percent during the month compared to May when investors traded Sh54.6 billion securities.
Market liquidity was buoyed by heavy maturities of government paper and its payment of pending bills, coupled with reduced appetite for new borrowing in primary auctions as the government closed its fiscal year.
This has depressed the interest rates on offer for new issues, leaving investors to scour the secondary market for higher paying paper.
“Liquidity conditions improved markedly towards the end of June bolstered by government payments to suppliers, government agencies and parastatals,” said Commercial Bank of Africa in a fixed income brief.
Banks, which are the biggest holders of government domestic debt — at 54 percent or Sh1.5 trillion out of the total debt of Sh2.78 trillion — have seen the liquidity at hand on an upward trend this year.
The banking sector liquidity ratio stood at 51 percent at the end of April, which is the highest level since May 2017. It stood at 49.1 percent at the beginning of this year.
The higher bond turnover in June took the turnover for the first half of 2019 to Sh352.7 billion, which represents a 15 percent increase on the same period last year, when investors traded Sh305.9 billion worth of paper.
The increase is good news for market intermediaries, who depend on commission earnings from bonds and equity trades for revenue.
This is especially due to the dip in equities turnover this year as share prices continue to stagnate or dip for most counters.
Half-year turnover in the equities market in 2019 stood at Sh78.1 billion, compared to Sh108.3 billion in the same period in 2018.
The intermediaries also earn revenue from handling corporate advisory deals, but these have also been in short supply due to fewer listings of both corporate bonds and companies at the bourse.