Nairobi Securities Exchange (NSE) bond turnover NSE fell by 18 percent last month to Sh54.6 billion, cutting brokers’ income.
Rising debt maturities are, however, expected to feed into the market this month and raise trading activity.
Analysts at Sterling Capital say tight liquidity in the market affected traded volumes in most of May but expect some easing of the cash flow situation this month.
The number of trades during the month also went down, to 1,578 from 1,590 in April when turnover had been up by 6.9 percent month-on-month to Sh66.7 billion.
“We observed an increase in turnover over the last week of May due to an increase in liquidity (supported by government payments) and expect trading activity in June to be higher than that in May,” said Sterling in a fixed income note last week.
Market intermediaries depend on commission earnings from bonds and equities trades for revenue, hence the dip in May would present reason for concern. They are still on track, however, to beat last year in commissions since the year-to-date turnover remain above that of the corresponding period in 2018, May 2019’s dip notwithstanding. In the five months to May 2019, bond trades at the NSE totalled Sh282.9 billion, a 15 percent increase on the Sh247.1 billion traded in the first five months of 2018.
The higher bond trades would ease the pain of a potential fall in equities commissions for the stockbrokers and investment banks, going by traded volumes so far this year.
The value of equities trades at the NSE in the first five months of the year fell by 29 percent or Sh27 billion to Sh67.6 billion compared to the same period last year, largely on reduced local investor trading during the period.
Lower share prices also mean that fixed income is beating equities in returns to investors, even though interest rates on bonds have continued to point downwards.
The Sterling analysts say there is a likelihood of a decline in domestic debt demand by the government following the successful issuance of the Sh210 billion Eurobond last month, hence CBK is likely to keep rejecting aggressive investor bids in debt auctions.