The 16-year infrastructure bond dated October 28, received bids totalling KSh 86.9 billion against an advertised amount of Sh 60.0 billion, representing a 144.9 % subscription rate.
On the second day of its listing in the secondary market, the NSE trading activity recorded a historically high bond turnover of KSh 11.8 billion, mainly on account of the infrastructure bond signalling appreciation of this bond by investors.
In a note to investors, Citi Bank announced they were buying the Kenya Infrastructure Bond (KENIB 2035) citing the attractive yield of 12 per cent, an improvement in the country’s current account and shrinking inflationary pressure.
“We will enter the trade on an FX-unhedged format (spot ref. at 103.53)…The auction was healthy with a bid-to-cover of 1.27x and the weighted average yield came at 12.394%, despite some uncertainty on the interest rate caps, given the President’s refusal to approve the Finance Bill 2019.” read the note.
“Also, the increased foreign interest in frontier countries due to the still benign EM macro environment may support adding duration. Risks to the trade include higher domestic borrowing that put pressure on long-end bonds and renewed inflationary pressures,” adds Citi’s report.
The Kenya Shilling remained stable against major international and regional currencies during the week ending October 31. It exchanged at Sh 103.21 per US Dollar on October 31, compared to Sh 103.51 on October 24.
Current Account Preliminary data shows that the current account deficit narrowed to 4.1 per cent of GDP in the 12 months to September 2019 from 5.0 per cent in December 2018.
This reflects slower growth of imports and resilient diaspora remittances. The CBK usable foreign exchange reserves remained adequate at $8,961 million (5.6 months of import cover) as of October 31.
Overall inflation in October remained within the medium-term target band. It increased to 4.95 per cent from 3.83 per cent in September, mainly driven by increases in prices of a few food items. Food inflation increased to 8.1 per cent from 5.9 per cent in September, following increases in prices of maize products and tomatoes.
However, fuel inflation remained low at 1.4 per cent compared to 1.3 per cent in September, in line with trends in both domestic and international energy prices. Non-Food-Non Fuel inflation increased marginally to 2.6 per cent from 2.4 per cent in September, mainly driven by increases in prices of cigarettes, spirits, beer, wines, and airtime.
This meets the CBK’s statutory requirement of at least 4 months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover.
The money market remained liquid during the week ending October 31, supported by government payments. Commercial banks’ excess reserves stood at Sh 17.3 billion in relation to the 5.25 per cent cash reserves requirement (CRR).
The average interbank rate decreased to 6.13 per cent on October 31 from 6.76 per cent on October 24. The average number of interbank deals per day increased to 25 from 19 the previous week, while the value traded also increased to Sh16.5 billion from Sh 12.4 billion in the previous week.
The Treasury bills auctions of October 31 received bids totalling Sh 27.4 billion against an advertised amount of Sh 24.0 billion, representing a performance of 114.3 per cent. Interest rates on the 91-day and 182-day Treasury bills decreased while that on the 364-day Treasury bill remained the same as in the previous auction
Trading activity at the Nairobi Securities Exchange improved during the week ending October 31. The NASI, NSE 20, and the NSE 25 share price indices increased by 6.3 per cent, 6.4 per cent, and 9.2 per cent, respectively. Similarly, market capitalization increased by 6.5 per cent.
Turnover in the domestic secondary bond market increased by 347.9 per cent during the week ending (Table 6). In the international market, yields on Kenya’s 7-year, 10-year (2024), 10-year (2028), and 30-year Eurobonds declined by 4.5, 3.8, 8.2 and 7.8 basis points, respectively.
Kenya Economic Update The World Bank released its bi-annual report ‘the Kenya Economic Update’ and observed that despite the strong growth in 2018 at 6.3 per cent, the momentum softened in 2019 with the economy expected to grow.
