Kenya’s eurobond yields dropped sharply on the back of reports by ratings agency Moody’s that a planned buyback of some of the debt may be treated as a default.

“Yields on the notes soared 46 basis points on Wednesday, the most in almost a month, to 13.35 per cent,” Bloomberg reports say.

In June, President William Ruto had announced his intention to buy back half of Kenya’s $2 billion of 2024 eurobonds before the end of this year, as part of government’s efforts in managing debt sustainably.
David Rogovic, a vice president and senior credit officer at Moody’s told Bloomberg that redeeming bonds at a price below par value would constitute an economic loss to investors. “We need to see the details and the terms of the buyback before we can assess whether it constitutes a distressed exchange, and therefore a default under Moody’s definition.”

Kenya’s was put on the spot last week after rating agencies Moody’s and Fitch downgraded risks to negative outlook as eurobonds yields fell.

“In the international market, yields on Kenya’s Eurobonds declined by an average of 40.0 basis points, with the 2024 maturity declining by 20.9 basis points,” noted CBK in its weekly bulletin, amidst concerns that global ratings agencies have an outsized influence on markets.

Experts are having issue with rating firms: “You have four private companies registered in only one country in the world who collect data on every country in the world, whose staff are churning out assessments of countries, now these private entities make a profit out of this and there isn’t regulation around it, but the effect that they have is huge,” Prof. Attiya Waris of University of Nairobi and UN expert on foreign debt told a local media.