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Eurobond yields rise after IMF debt default warning

National Treasury
The National Treasury building in Nairobi. FILE PHOTO | NMG 

Yields on Kenya’s Eurobonds have edged up by between 0.3 and 0.12 percentage points since the International Monetary Fund (IMF) raised the country’s chances of debt repayment default from low to moderate on October 23.

The rise is a signal international investors are pricing higher risk on Kenya and will demand higher returns, making it more expensive for Treasury to borrow abroad in new debt.

The IMF cited shortfalls in revenue in recent years amid rising cash demand for government’s projects, which pushes her to borrow, for downgrading Nairobi’s debt rating.

The yield on Kenya’s 2024 10-year, $1.5 billion (Sh150 billion) bond trading on the secondary market of the Irish Stock Exchange stood at 7.57 percent last Thursday compared with 7.26 percent on October 23.

The secondary market yields on the five-year $750 million bond, which matures in June stood at 5.03 percent compared with 4.9 percent in October.


The yield on the 10-year bond maturing in 2028 — which was issued in February this year — has increased to 8.22 percent from 7.98 percent before the IMF raised Kenya’s debt distress risk.

The yield on the 30-year paper maturing in 2048 has risen to 9.19 percent from 8.95 percent.

“Almost all the increase in public external debt has come from commercial lenders, who demand higher interest rates than multilateral and bilateral lenders. This shift towards borrowing from external commercial creditors is a key reason why Kenya’s, and other African nations’, debt positions looks increasingly fragile,” economists at London-based research consultancy Capital Economics said in a note on Kenya last week.