Capital Markets

Eurobond yields’ fall signals friendly foreign debt market for Kenya

Investors are growing in confidence of Kenyan outlook. FILE PHOTO | NMG
Investors are growing in confidence of Kenyan outlook. FILE PHOTO | NMG 

Kenya’s Eurobond yields have dropped significantly in the last six months as investors continue to show faith in the economy, meaning the government is likely to find it cheaper to borrow from international bond lenders than three-and-a-half year ago.

Latest data shows the yield on the 10-year paper maturing in 2024 stands at 5.51 per cent, down from 6.3 per cent last June, while on the five-year paper that matures next year the yield has fallen to 3.72 per cent from 6.5 per cent.

The decline also mirrors the reduced fears by investors about the state of the country after the conclusion of a prolonged general election, which saw protests causing economic disruptions.

“The declining Eurobond yields and stable rating by Standard & Poor (S&P) are indications that Kenya’s macro-economic environment remains stable and hence an attractive investment destination.

However, concerns from Moody’s and the International Monetary Fund (IMF) around Kenya’s rising debt to GDP levels may see Kenya receive a downgraded sovereign credit rating,” said Cytonn Investments in a market report.

The lower yields, although taking into account that the papers are nearing maturity, are a broad indicator of the level of interest that investors would demand should Kenya opt to float another Eurobond. The Treasury has said an external bond is an option in the bid to bridge the wide budget deficit.