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WEEKLY FIXED INCOME REPORT - WEEK 14

Weekly Wrap:

Secondary market turnover narrowed 22.56% w/w to close at KES 7.33Bn. This was in line with our expectation as a number of institutional investors are mapping out 2Q18 investment strategies. The top five bonds accounted for 70.85% of the total turnover with the IFB1/2018/15Yr paper contributing 25.42% of the week’s turnover. The market is currently skewed to the short-end segment, with the trend likely to spill over in the coming week.

USDKES:

The shilling traded in a tight range against the US dollar to close at 101.07. The local unit was buoyed by thinning import demand coupled with dollar inflows. US nonfarm payrolls for the month of March underwhelmed with a 103,000 print against an expected 193,000. Mounting concern on the US-China trade tiff will likely ease the dollar in the coming week buoying the home currency. 

Money Market:                                             

The average interbank rate increased 44bps to 6.30% in the week. This was attributed to payment of government securities totaling KES 27.27Bn in the course of the week. Overall weekly volumes increased by KES 24.58Bn to KES 102.09Bn. We expect some tightness in the interbank rate as we approach the tail end of the current CRR cycle.

This Week’s Outlook:

We are likely to see an uptick in secondary market turnover in the week as institutional investors slowly scale their trading activities. The Consultative Forum of Domestic Debt is expected to re-open the 20-year paper issued last month coupled with a five-year duration paper to appease a wider pool of investors.