The increase in Eurobond yields — which indicates that their prices have fallen in the past six months — is mainly related to emerging and frontier markets selloffs following the hike of the US bench mark rate to two from 1.75 per cent in June.
The 10-year paper maturing in 2024 has seen its rate rise by 1.62 percentage points to 7.22 per cent. The paper started the year at 5.6 per cent.
The other 10-year bond that was floated this year and is due in 2028 is currently trading at 0.27 percentage points above its opening level (as at February) of 7.07 per cent.
Yields for Kenyan Eurobonds have risen by up to 1.7 percentage points in the last six months as the international debt market continues to become expensive due to higher US interest rates.
The increase in Eurobond yields — which indicates that their prices have fallen in the past six months — is mainly related to emerging and frontier markets selloffs following the hike of the US bench mark rate to two from 1.75 per cent in June.
“The change in the US bench mark rate saw many investors getting out of assets in markets where the risk-return rate was now the same as in the US,” said Edwin Chui, research analyst with Dyer and Blair Investment Bank.
The situation has been made worse by the promise by the Federal Reserve to raise the Fed rate four times this year, fundamentally changing the risk-return profile of the US fixed-income market to the detriment of overseas portfolio investments in emerging and frontier markets.
“It is not really the macroeconomic developments in Kenya or other sub-Saharan African economies that have caused the rise in the rates. Yes, the IMF came for a review in Kenya but only if they make an announcement that we have not complied could that affect the yields,” said Mr Chui.
The IMF insurance facility is due to expire next month, but both Central Bank of Kenya governor Patrick Njoroge and presidential advisor Mbui Wagacha have commented that the country does not need the facility given its strong position on official foreign exchange reserves.
Kenya’s five-year Eurobond that matures next year has risen by the highest margin of 1.66 percentage points to 5.25 per cent.
The 10-year paper maturing in 2024 has seen its rate rise by 1.62 percentage points to 7.22 per cent. The paper started the year at 5.6 per cent.
The other 10-year bond that was floated this year and is due in 2028 is currently trading at 0.27 percentage points above its opening level (as at February) of 7.07 per cent.
The 30-year bond that matures in 2048 has seen its yield go up to 8.43 per cent from 8.02 in February.
