Bondholders made a profit of N14 billion from trading on the Nairobi Securities Exchange (NSE) secondary market in the second half of the year, benefiting from higher prices of infrastructure bonds.
Investors sold bonds with a face value of Sh309.6 billion against a volume of Sh323.6 billion in the quarter, CMA data showed.
The profits from these sales helped the company reverse a Sh2.9 billion loss on sales made in the first quarter of the year, when it transferred securities worth Sh212.4 billion at face value for Sh209.5 billion.
The majority of the bond sale gains recorded in the second quarter were from the 8.5-year infrastructure bonds launched in February this year. The bonds raised Sh240.9 billion in their initial sale from Sh288 billion in bids – the highest subscription and acceptance rates ever seen by the Treasury for a single issue.
The bond turned out to be the most traded in the secondary market since its listing, indicating sales by foreign investors who saw an opportunity to make exchange gains on the exit due to the strengthening of the shilling against the dollar since March.
In April, the bonds made a profit of Sh3.1 billion for those who sold them in the market, collecting Sh37.7 billion from their transactions against a face value of Sh34.6 billion. In May, the bonds made a profit of Sh54.54 billion for sellers against a face value of Sh49.6 billion, thus making a profit of Sh4.8 billion.
In June, sellers of the bonds made Sh5.7 billion in profits, after trading volume reached Sh56.1 billion against the face value of Sh50.4 billion.
Overall, according to data from the Indian Stock Exchange, the market’s bond trading volume in the first half of the year stood at Sh777 billion, already surpassing the full-year total of Sh643.9 billion for 2023, as investors capitalized on demand for high-yielding infrastructure bonds.
Most of the international Islamic bonds were traded at prices above Sh100 – the nominal value of the bonds – and at lower yields, indicating high demand for the securities in the secondary market.
At the end of last week, the 8.5-year IFB was trading at Sh104.53 per unit of Sh100, while its yield was 17.2 per cent, compared to its coupon (effective interest rate) of 18.46 per cent.
Bond yields and secondary market prices typically have an inverse relationship, with a rise in one indicating a fall in the other.
Yields rise when risk sentiment is high, meaning investors are willing to offer their bonds at a discount to secure buyers and thus get new issues in the primary market at higher interest rates.
On the other hand, lower risk sentiment leads to lower yields and higher prices, as investors demand an additional premium to part with their existing bonds in favor of new issues of similar duration that pay lower interest.
