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WEEKLY FIXED INCOME REPORT - WEEK 15

Weekly Wrap:

Secondary market turnover rebounded 50.56% w/w to close at KES 11.03Bn. The trades were boosted by infrastructure bonds and shorter duration papers. Demand overhung is still marked at the short end of the yield curve. The top five bonds accounted for 56.52% of the total turnover with the IFB1/2018/15Yr paper continuing being the dominant paper. Sell buyback transactions totaled KES 731.5Mn representing 6.63% of the week’s total activity.

USDKES:

The shilling touched a 3-month low of 103.25 against the US dollar before rebounding back to close at 100.92. Minutes from the Federal Open Market Committee March meeting showed that all Fed policymakers expected 12-month inflation to rise in coming months. Usable foreign exchange reserves held at the CBK increased by USD 18Mn to USD 8.83Bn; equal to 5.90months of import cover. 

Money Market:                                             

The average interbank rate declined 86bps to 5.44% in the week. The improved interbank rate was attributed to fund mobilization ahead of the tax remittances scheduled in the coming week. Overall weekly volumes retreated by KES 24.54Bn to KES 77.55Bn. The CBK intervened in the market to mop up excess liquidity via reverse repo totaling KES 10Bn on Friday’s session.

This Week’s Outlook:

With the announcement of this month’s primary bond sale, we expect subdued secondary market turnover. We also expect tightness in the interbank market in the terrain of the week. This will be driven by the turn to a new CRR cycle coupled with the scheduled corporate tax remittances that will dry up liquidity.