Yields on the seven-, 10- and 30-year bonds rose in the week ending September 26.
The week was also marked by increase in yields of Angola’s and Ghana’s Eurobonds.
Kenyan Eurobond yields have risen in the past two weeks as global markets remained unsettled and news filtered in that rating agency Moody’s would review the country’s creditworthiness, with chances that it could be lowered.
Data from the Central Bank of Kenya (CBK) showed that yields on the seven-, 10- and 30-year bonds rose in the week ending September 26. The week was also marked by increase in yields of Angola’s and Ghana’s Eurobonds.
“In the international market, yields on Kenya’s seven-year, 10-year (2024), 10-year (2028), 12-year and 30-year Eurobonds increased by 17.2, 17.9, 13.2, 18.7 and 20.5 basis points, respectively. Yields on 10-year Eurobonds for Angola and Ghana also increased during the week,” said the CBK.
“Global financial markets remained unsettled during the week ending September 26 due to political uncertainties in the US, and the economic data that showed a sharper contraction of business investment in the second quarter than previously estimated. Brexit uncertainties also remained despite the reconvening of UK Parliament,” the monetary authority added.
Nairobi-based Cytonn Investments however said the pending review of the Moody’s Investors Service could have had an impact on the Kenya Eurobonds because of the chances that it could see the credit rating lowered in view of the rising debt and high fiscal deficit.
“The rise in Eurobond yields in the past three weeks has been attributable to news that global rating firm Moody’s could further lower Kenya’s creditworthiness currently at ‘B2 stable’ following the completion of their periodic review on Kenya, where they raised concern over the country's very low fiscal strength, ballooning debt and rampant corruption,” said Cytonn Investments in a market report.
The proportion of total public debt to the gross domestic product stands at close to 60 per cent while the fiscal deficit hit 7.6 per cent in the year to June against a target of 5.7 per cent — about two percentage points above target.
The share of the debt held by foreign commercial lender has also hit Sh1 trillion, compared to Sh276 billion in 2015, which given the higher rates on such debt has raised the amount Kenya is spending in debt service.
Moody’s said that whereas Kenya’s current rating of B2 is indicative of moderate economic strength and high economic growth rates, it also shows that the country has little wealth, its institutions are weak, the rule of law is weak and the corruption level is elevated.
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