This archive report was first published on 10 July 2019.
On June 30, 2019, the Nairobi Securities Exchange (NSE) recorded a six-year high in monthly bond turnover, reaching Sh69.8 billion.
This significant increase was largely attributed to improved market liquidity, which saw investors turn to the secondary market in search of higher yields.
According to NSE data, the turnover rose by 28 percent during the month compared to May, when investors traded Sh54.6 billion worth of securities.
Market analysts pointed to heavy maturities of government paper and the payment of pending bills as key factors contributing to the improved liquidity.
Additionally, the government's reduced appetite for new borrowing in primary auctions, as it closed its fiscal year, further boosted market liquidity.
"Liquidity conditions improved markedly towards the end of June bolstered by government payments to suppliers, government agencies and parastatals," noted Commercial Bank of Africa in a fixed income brief.
The improved liquidity had a positive impact on the banking sector, with banks experiencing an upward trend in liquidity throughout the year.
At the end of April 2019, the banking sector liquidity ratio stood at 51 percent, the highest level since May 2017.
The higher bond turnover in June contributed to a significant increase in the total turnover for the first half of 2019, reaching Sh352.7 billion, a 15 percent increase compared to the same period in 2018.
This development is welcome news for market intermediaries, who rely on commission earnings from bonds and equity trades for revenue.
