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Kenya's Eurobond Yields Decline as Investor Confidence Grows

Yields on Kenyan Eurobonds have seen a notable decline, marking a shift in investor sentiment as concerns surrounding the country’s debt obligations ease. The interest rates on various Eurobond issues have dropped into single-digit territory, reflecting a more favorable outlook for Kenyan sovereign assets in global financial markets.

This positive trend follows the partial payment of the debut Eurobond, with yields on the Eurobond maturing in June dropping to 9.93 percent as of Monday’s close, down from a high of 15.09 percent recorded earlier in February. Similar decreases have been observed across other Eurobond maturities, including those maturing in 2027, 2028, 2032, 2034, and 2048.

Analysts attribute the falling yields to a recalibration of risk perceptions by investors, who are now more optimistic about Kenya’s ability to meet its debt obligations. Last week, the National Treasury initiated a buyback of notes from the 2014 Eurobond, a move that has helped alleviate concerns and reduce the remaining balance to be cleared on June 24.

This buyback represents Kenya’s first step towards implementing liability management operations, which are seen as crucial for effective debt management, especially for external debt. Plans to leverage debt swaps and buybacks are part of broader public debt management reforms outlined by the National Treasury.

Despite the premium paid for the buyback and the higher rate offered on the new bond, investor interest in Kenyan assets is on the rise. The influx of dollars into the market following the new issuance has improved forex liquidity, leading to significant gains for the Kenya Shilling against the US dollar last week.

In summary, Kenya’s Eurobond yields are signaling a more positive outlook, reflecting growing investor confidence in the country’s fiscal management amidst ongoing efforts to address debt concerns.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

22nd February, 2024

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