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Eurobond yields decline further


The Central Bank of Kenya headquarters in Nairobi. FILE PHOTO | NMG

Yields on Kenya’s 10- and 30-year Eurobonds declined again last week, indicating rising prices of the securities and lower risk perception, Central Bank of Kenya (CBK) data shows.

The medium-term international bond due for payment in 2024 fell at the same time as similar bonds for Ghana and Angola.

During the week, Kenya’s 10-year bond (which is effectively a four-year because it is due in 2024), fell by 2.9 basis points to stand at 4.711 percent.

However, the bond ended last year at 4.835 percent, meaning that it has lost 12.4 basis points equivalent to 0.124 percentage points) in the first two weeks of the year compared to how it closed 2019.

The yield on the 30-year issue declined by 3.1 basis points (0.031 percentage points) during the week, but by a higher 8.2 basis points (0.082 percentage points) compared to the price at which the bond closed last year.

“In the international market, yields on Kenya’s 10-year (2024) and 30-year (2048) Eurobonds declined by 2.9 and 3.1 basis points, respectively. On the other hand, the yields on seven-year (2027), 10-year (2028) and 12-year (2032) Eurobonds rose by 9.2, 3.4 and 5.9 basis points, respectively,” said the CBK.

The decline in yields represents lower risk perception for the securities and implies that the Treasury could raise money globally at relatively lower rates compared to the end of last year.

“The fall in the Eurobond yields shows that the risk perception for Kenya has declined. It means that the Treasury can raise money, if it indeed wanted to, at relatively lower rates,” said a research analyst with an investment bank in Nairobi.

However, Kenya’s other bonds including the seven-year (due in 2027), the 10-year (due in 2028) and the 12-year (due in 2032) rose – implying the bonds have lower attraction for investors since prices fell.

For those marking to market such as financial institutions that ordinarily hold large chunks of government securities, the rise in yields would mean lower prices with the impact of affecting the bottom line.