After the base rate cut, the government bond market began to restructure. Yields on long-term securities are declining, which could be the first signal of future cheaper money in the economy, reports economist Ruslan Sultanov. This was reported by Qazaqyia.kz citing Kursiv Media.
In June, the volume of government securities trading on the Kazakhstan Stock Exchange (KASE) amounted to 777.4 billion tenge. Compared to May, the figure decreased by 8.5%, but market participant activity remained high. The average daily trading volume reached 35.3 billion tenge, with an average of 26 transactions per day.
Through the primary market, the Ministry of Finance and local executive bodies attracted 578.7 billion tenge in new financing.
The largest placement in June was the issue of 12-year government bonds by the Ministry of Finance worth 116.3 billion tenge. Investor interest remained high – for some issues, demand exceeded supply by four to six times.
Secondary market statistics show that large financial institutions remain the main trading participants. Banks accounted for 59.9% of total turnover. Pension funds, insurance companies, and other institutional investors provided another 15.9%. The share of other legal entities was 22.4%, broker-dealer organizations – 1%, and individuals – only 0.6%.
Foreign investors accounted for 16.1% of secondary market turnover. For comparison, a month earlier this figure was 25.3%.
The main trend in June was the decline in government bond yields.
According to KASE data, the yield on short-term securities with a maturity of up to one year fell to 17.04%. For bonds with a maturity of one to five years, the figure was 15.85%, and for long-term issues – 14.79%.
For example, in the first half of June, 12-year Ministry of Finance bonds were placed at 14.97%, while in the second half of the month the yield dropped to 14.47%. The yield on an issue with a maturity of 7.7 years, placed on June 23, was 14.25%.
At the same time, for some short-term issues, investors still expected to receive about 17% per annum.
In addition, in June, the government placed floating-rate bonds linked to the TONIA indicator. Through such instruments, over 120 billion tenge was raised.
June was the first full month after the National Bank cut the base rate from 18% to 17%. The government bond market has already begun to factor in this decision, as evidenced by the decline in yields on medium- and long-term issues.
However, as economist Sultanov notes, this does not mean an immediate reduction in the cost of loans and mortgages. Banks will need time to review the cost of raising resources and adjust the terms of their products. However, the dynamics of the government bond market show that the largest banks, pension funds, and investment companies are already beginning to price in expectations of lower money costs. If this trend continues, it could eventually affect both deposit yields and rates on new loans.
Earlier, experts from the brokerage company BCC Invest stated in their economic review that it is more profitable for Kazakhstanis to invest savings in bonds rather than keep them in deposits.