Kenya Eurobond yields fall, risks improve
Yields on the Kenyan Eurobonds fell as the country’s risk sentiment improved on better management of Covid-19 pandemic.
Fresh data shows yields on Eurobonds listed in London fell from as high as 10 per cent during the announcement of the first Coronavirus infections to about 7 per cent currently.
This means that bond traders in the secondary market are now selling off at higher prices as risk sentiment improves.
The yields have been falling for three months after peaking in May but heavy debt and high fiscal deficit led to an up tick by two basis points last week.
“Higher debt levels and wider fiscal deficits, have kept sovereign bond spreads at levels higher than those witnessed at the beginning of the year,” said Cytonn in its latest market report.
Lower yields
Lower yields mean that the issuer can issue another Eurobond but the current environment is not encouraging given Kenya’s elevated debt and the Covid-19 pandemic.
Kenya’s 10-year 2014 Eurobond was trading 6.4 per cent last month while the 2019, 12-year bond was trading at 8 per cent.
When yields rise, prices fall and vice-versa as bond prices are indirectly proportional to bond yields.
Kenya moved quickly to put in place acute restrictions to contain the spread of the virus helping to reduce casualties.
However, the country has started experiencing renewed infections with government officials warning they would put in place restrictions should the situation worsen.
Eurobond yields on Angola and Ghana’s issued paper tracked Kenya’s curve reflecting an equal risk perception for the lenders.
Kenya’s economic growth has remained resilient due to non-reliance on commodity exports.
