Soaring yields attract Nairobi bourse investors to bonds market

High interest rates have enticed investors to bonds at the Nairobi Securities Exchange (NSE), pushing down trading of equities.

As equities' trading at the Nairobi bourse flounders, hitting as low as 2 million U.S. dollars daily, turnover at the bonds market has been growing each session, recording up to 34 million dollars.

Interest rates on the long-term securities trading at the bourse range from 12 percent to 14 percent, which is even higher than those at the debt market, where they are first sold.

The yield curve has exhibited an increasing upward trend for several securities.

On Wednesday, the bonds market witnessed an upswing of activities with securities worth 34 million dollars being transacted, up from 27 million dollars Tuesday.

The most popular security was the infrastructure bond IFB 1/2016/15Yr, which had transactions worth over 11 million dollars.

The security which debuted at the bourse recently, traded at an interest rate of 13.2 percent, same yield when it was sold at debt market.

During its sale at the Central Bank, it attracted bids worth 346 million dollars with the government accepting 302 million dollars, 5 million dollars more than what it had sought.

Other active bonds at the Nairobi bourse Wednesday included the FXD1/2016/10Yr and FXD1/2016/20Yr.

Last week, the bond market registered a great improvement with securities worth 86 million dollars transacted, compared to 70 million the previous week.

This was incomparable to the turnover during the week at the equities segment which stood at 11 million dollars, a drop from 28 million the previous week.

As at the debt market, analysts have attributed the surge in trading at the Nairobi bourse bonds market to commercial banks that are seeking to increase their holding on government securities to make up for rate capping introduced September.

"Activity in the secondary markets is expected to pick up as interest rates find a new equilibrium," said an analyst. Endit