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Capital Markets

Rise in Eurobond yields signals higher country risk perception

Central Bank of Kenya. FILE PHOTO | NMG
Central Bank of Kenya. FILE PHOTO | NMG 

Yields on Kenya’s Eurobonds have gone up this month, indicating that investors are pricing higher risk on the country at a time debate is focusing on the fast growth of public debt amid fiscal leakages through corruption.

At the end of last week, the secondary market yields on the five-year bond maturing next year stood at 5.75 per cent compared to 5.28 per cent at the beginning of the month, while that of the 10-year bond maturing in 2024 had risen from 6.62 per cent to 7.1 per cent.

The yield on the 10-year bond maturing in 2028 —which was issued in February —has risen from 7.2 per cent at the beginning of the month to 7.67 per cent. The yield on the 30-year paper maturing in 2048 has gone up to 8.4 per cent from 8.1 per cent.

The rise has also been attributed to a global trend that has seen investors flocking back to the US markets as interest rates in the world’s largest economy rise, hence the demand for a premium on frontier and emerging market debt.

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“The yields on Kenyan Eurobonds increased across all the four tranches compared to the previous week.... Compared to 10-year Eurobonds issued by select African countries, the yield on Kenya’s 10 year Eurobond remains lower and stable,” said CBK in its weekly bulletin for last week.

Kenya is, however, also grappling with persistent fiscal questions, especially on the sustainability of public debt which has now hit Sh5 trillion.

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