Kenya’s recent Sh60 billion infrastructure bond has been oversubscribed by153 per cent due to high interest rates offered by the Central Bank of Kenya (CBK).

This means the government is going to give a return of 13.9 per cent below the 14 per cent average market bid rate.

It also indicates that investors have signalled high appetite for the bond which is normally tax-free with some analysts saying it was a vote of confidence in President William Ruto’s economic strategy. “The market has, at last, believed the Ruto administration is serious about austerity. The Sh300b budget cut trick working. Liquidity is loosening up it seems,” said Wehliye Mohamed, a Kenyan and senior adviser at the Saudi Arabian Monetary Authority.

“The general perception is that the rates should go higher. Foreign investors have been leaving this market and this has definitely affected the performance of the rates,” said Sunil Sanger of Orion Advisory Group. On his part, Churchil Ogutu, an economist at IC Group said the yields have gone up due to the US Federal Rate increase. “As a result investors are demanding higher yields. We may be in a double-digit worry for quite a while,” Ogutu said.

The bond could see foreign investors pile dollars helping to shore up the country’s stock of foreign exchange (Forex).

When a bond fetches 13.98 per cent it means that other asset classes will struggle to find investors who are now looking for high returns. Total bids received clocked Sh98.84 billion against Sh60 billion offered. Amount accepted is Sh75.57 billion.

Kenya Eurobonds are trading at nearly the same rate of 14 per cent due to market volatility caused by rising interest rates globally though the pressure is reducing.

“In the international market, yields on Kenya’s Eurobonds declined by an average of 44.4 basis points, with 2024 maturity declining by 58.2 basis points,” said the central bank in its weekly bulletin.

Commercial Banks have also raised interest rates they use to lend to the public and corporates due to the better rates they get from investments in government bonds.

The NSE has been the worst-performing bourse in the group of most tracked counters in Africa for two consecutive months.

According to CBK data on lending rates by borrower type, business firms paid 13.95 per cent on average in September for loans with terms between one and five years, up from 11.9 per cent a year earlier.

Smaller companies, who paid the highest average rate at 12.5 per cent a year ago, are now being charged 13.8 per cent as the loan pricing seesaws in their favour.

In September, the average interest rate for personal loans to individuals increased to 13.2 per cent from 12.1 per cent a year earlier.

Due to the lower risk of default, corporate borrowers often pay lower interest rates than individuals and smaller firms.