Why Kenya could return to Eurobond

Tuesday, August 16th, 2022 00:30 | By
National Treasury Cabinet Secretary Ukur Yatani
National Treasury Cabinet Secretary Ukur Yatani

Kenya could soon be able to access and tap Eurobond markets for fundraising following a sharp fall in yields on the country’s sovereign bonds last week.

Yields on Kenya’s Eurobonds plunged by 248 basis points last week after months of successive growth giving respite to the country whose access to foreign funding had virtually been shut off due to high yields.

“In the international market, yields on Kenya’s Eurobonds declined by an average of 248.5 basis points, with the largest fall in yields (313.6 basis points) for the 2024 maturity,” the central bank said in its weekly bulletin.

Tap sales

Kenya’s Eurobonds are listed on London and Irish stock exchanges. The change in yields could give respite to Kenya which had resorted to tapping sales to raise funds to avoid rising interest rates. Kenya cancelled the sale of an Sh115 billion ($982 million) Eurobond and opted to borrow from commercial banks after the Russia-Ukraine war caused yields to surge on international markets.

“The high-interest rates in the Eurobond markets had essentially locked out Kenya from external financing given that rates had risen to over 17 per cent then 20 per cent and above,” said George Bodo, head of research at Genghis Capital.

Treasury Secretary Ukur Yattani also said the country had put aside plans to issue the Eurobond as earlier planned due to high-interest rates.

Kenya said in January it would issue a new sovereign bond for the 2021/22 (July-June) financial year to partly plug a 7.5 per cent budget deficit.

National Treasury Cabinet Secretary Ukur Yatani said the bond was no longer feasible, blaming the conflict in Ukraine for pushing up interest rates and causing yields on Kenya’s Eurobond to double to 12 per cent.

International Monetary Fund (IMF) data shows Kenya was one of the countries that had been listed among countries with a high chance of defaulting on their debt.

Kenya had last year sought a moratorium to have debt payments suspended for six months, a plea that was granted. Treasury had resorted to expensive loans from banks which are also short-term in nature posing threat to the economy.

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