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Citi urges 10-year Eurobond holders to take up profit

Citi Bank
Guests during a Citi Bank investor briefing in Nairobi earlier in the month. PHOTO | DIANA NGILA | NMG 

Investment bankers at Citi Global Markets have advised clients to take profit in the Kenyan 10-year Eurobond which has witnessed an increase in secondary market prices in recent months.

In a note Citi said that a total return of 6.2 percent had been on the bond between January 7 and March 6 — a period of two months. The bankers said they were taking profit as a result of the trading and advised clients to do the same.

The increase in prices has come about as a result of the fall in yields, since the two move in opposite directions. Between the beginning of the year and now, the yield on the paper is down by nearly two percentage points, pushing up the prices.

The bond is set to be redeemed in 2024. It was floated in 2014 when the Treasury was seeking to shore up its finances as well as encourage private investors to borrow offshore.

“We are taking profits in the long Kenya [10-year bond], initiated on January 7. [Kenya international sovereign bond] maturing in 2024 now trades at 402 bps over five-year US treasuries. We entered the trade at 524 bps spread. Total return in the trade is 6.2 percent,” said Citi.


Citi noted that the Kenyan bond had widened the spread with the five-year US Treasury bond.

The investment bankers said Kenya had outperformed its sub-Saharan peers with returns from the beginning of the year, in line with the nearly two-percentage points decline in yields.

“Kenya has outperformed its Sub-Saharan Africa peers, with returns at 14 percent year-to- date. As we have argued when initiating the trade, Kenya continues to benefit from a sound macro environment,” said Citi.