Kenya set to pay more interest for Eurobond debt, CBK data shows
By John Otini, March 7, 2022
Yields on Kenya’s Eurobond continued to spike last week as the Russia-Ukraine war forced foreign investors to reduce their exposure to emerging economies.
This means that the government will pay more in interest to investors compared to before helping to put pressure on the National Treasury.
Central Bank of Kenya (CBK) data shows that yields on eurobond rose by 28 basis points last week after rising by 86 basis points the previous week. “In the international market, yields on Kenya’s Eurobonds rose by an average of 28.4 basis points,” the banking sector regulator said in its weekly bulletin.
This also means that the country’s plan to issue another Eurobond this year could face challenges as investors grow wary of emerging markets.
National Treasury has been planning to go back to the international debt market to raise up to $2.19 billion before the end of the current fiscal year as part of budget deficit financing measures.
It has proposed a budget deficit of Sh846 billion which will force the government to seek funding from the international market. Eurobonds are the most popular avenues for such large scale borrowings due to their relatively low interest rates.
The secondary market yields on Kenya’s $6.1 billion (Sh694.4 billion) Eurobonds normally go up due to high risk perception on the debt, this makes prices to drop which results in rising yields. The four outstanding Eurobonds are traded on the Irish and London stock markets.
Secondary market
Performance of a country’s bonds on the secondary market have a bearing on its ability to successfully issue in the primary market.
The increase in yields will now see Kenya pay over five per cent from as low as three per cent last year. However, Eurobond yields on Ghana and Angola were far higher at seven and nine per cent respectively. African countries’ debt woes have featured prominently in the news since last year as they moved to seek debt restructuring indicating their deteriorating cashflow positions. – John Otini