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WEEKLY FIXED INCOME REPORT - WEEK 11

Weekly Wrap:

Secondary market turnover increased 28.18%w/w to settle at KES 14.75Bn. The 2018 infrastructure bond (IFB) continued its stellar run in the course of the week, contributing 29.82% of the total turnover. The top five traded bonds were dominated by short-end maturities as banks sought home for liquidity. Sell-Buy back transactions in the week were mainly on IFB1/2015/12Yr which accounted for 70.70% of the total KES 621.90Mn turnover.

USDKES:

The shilling traded in a tight range against the US dollar in the terrain of the week. The shilling was also supported by foreign inflows. The coming week will see the respective central banks hold their rate decisions.

Money Market:                                             

The average interbank rate declined 33bps to 4.28% in the week attributed to government spending. However, the rate edged up sharply on Friday’s session, as expected, in the incipient CRR cycle. In equal measure, volumes narrowed KES 18.26Bn to perch at KES 65.13Bn.

This Week’s Outlook:

The auction of this month’s bond will be held on Wednesday, March 21^st. We expect accepted bids on the 5-year to settle 15 – 25bps above last week’s close while 20 – 30bps on the prior week’s 20-year close. The highlight of the week will be the CBK Monetary Policy Committee (MPC) meeting scheduled to be held on Monday. The rate has been held steady at 10.00% in the preceding eight policy meetings. We are of the view that the CBR will be retained at the current 10.00%, with a likelihood of a downward adjustment, at the MPC meeting.