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Better global conditions to boost Kenya’s Eurobond take-up

Central bank of kenya
Kenya is eyeing a Eurobond issue as one of the options for financing her Sh635.5 billion budget deficit. FILE PHOTO | NMG 

Kenya’s efforts to take up a new Eurobond loan in 2019 could be boosted by improving credit conditions in the international market that have made it cheaper to access funds from international lenders.

Steve Brice, chief investment strategist at Standard Chartered’s group wealth management unit, said on Monday factors such as rising US interest rates and yields and a strong dollar that pulled capital from smaller markets are easing.

This should in turn see bonds issued by countries such as Kenya attract fairer pricing.

“If you rewind to 2018, the US Fed was hiking rates, the quantitative easing programme was tapering and yields in the US were going up … a lot of these pressures are easing now, where we expect just one Fed hike this year, QE (quantitative easing) tapering to stop possibly September and US yields are coming down,” said Mr Brice.

“Against that backdrop, for an international investor the Kenyan Eurobond now offers a competitive option, and therefore pricing should be more attractive than it was for instance in September last year.”

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Kenya is eyeing a Eurobond issue as one of the options for financing her Sh635.5 billion budget deficit, in which Sh321.5 billion is expected to be in external debt.

The Treasury has so far held off from issuing the Eurobond, with one eye on the expected interest rate level that would be demanded by investors.

In recent weeks, however, yields on all of Kenya’s outstanding issues have been coming down, by between 1.5 and two percentage points.

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