Capital Markets

Yields on sovereign bonds fall from Feb

Nairobi Securities Exchange staff monitors trading on the board. FILE PHOTO | NMG
Nairobi Securities Exchange staff monitors trading on the board. FILE PHOTO | NMG 

Yields on Kenya’s sovereign bonds have continued to fall since mid-February, indicating that investors are taking a positive outlook on the country following the conclusion of the elections period in 2017.

Data on the secondary market yields of the 10-year 2014 bond that matures in 2024 shows a fall of 34 basis points (equivalent to 0.34 percentage points) to 6.39 per cent since February 15, while the yield on the five-year tranche that matures next year has fallen nine basis points (0.09 percentage points) to 3.87 per cent in the period.

Falling yields in the secondary market normally indicate that investors are placing lower risk premium on a security’s issuer, with the price of the bond in turn going up.

“The yields on Kenya’s five-year and 10-year Eurobonds reduced, indicating reduced risk perception about the Kenyan economy.

“The overwhelming response to the new Eurobonds was also a reflection of Kenya’s positive global image,” said the Central Bank of Kenya (CBK) in its latest weekly report.

The yields had been on a gradual rise between July last year and mid last month, a time when the focus on Kenya was largely negative due to a bitterly disputed presidential election that coincided with a slowdown in the economy.

The newly issued 10-year and 30-year Eurobonds, which have been trading on the London Stock Exchange for the last two weeks, have also seen their yields come down relative to the issuance coupon rate.

The 10-year paper maturing in 2028 now carries a secondary market yield of 6.99 per cent, relative to its coupon of 7.25 per cent. The 30-year paper maturing in 2048 is carrying a yield of 7.95 per cent, with its issuance coupon having been 8.25 per cent.

In the domestic fixed-income market, there has been a slight downturn in yields in primary auctions while secondary market yields remained largely flat in February.

The yield on the 91-day Treasury bill was flat at eight per cent last month, while that of the 182- and 364-day T-bills fell by 20 and 10 basis points respectively to 10.4 and 11.1 per cent.