Politics and policy
The Treasury: Analysts say demand for Kenya’s Eurobond reflects abundant liquidity in global financial market. Photo/FILE
By John Gachiri
In Summary
- Treasury will accept $2 billion (Sh175.6 billion), breaking an African record.
- Kenya had targeted to borrow between $1.5 billion (Sh131.7 billion) to $2 billion (Sh175.6 billion).
- Analysts said the outcome reflected the abundance of liquidity in global financial markets chasing yields, as well as showing that confidence in Kenya’s diversified economy trumped worries about attacks by Somali-linked Islamist militants.
Kenya secured bids worth $8 billion (Sh702.4 billion)
for its debut Eurobond, highlighting foreign investor confidence in a
country grappling with terror threats.
A senior official, who asked not to be named, told the Business Daily that Treasury will accept $2 billion (Sh175.6 billion), saying the bond has broken an African record.
“It is the largest ever debut for an African
country and speaks of the country’s high standing in the international
financial markets,” said the official.
“Kenya’s low yield and high investors’ interest
reflect prudent and shrewd timing. Kenya received orders…four times than
it wanted.”
Kenya had targeted to borrow between $1.5 billion (Sh131.7 billion) to $2 billion (Sh175.6 billion).
The issue came in two tenors with a five-year
tranche of $500 million (Sh43.9 billion) offering investors a minimum
six per cent return and a 10-year portion of $1.5 billion (Sh131.7
billion) guaranteeing a yield of seven per cent. These were lower than
an earlier Treasury estimate of slightly over eight per cent.
The oversubscription and lower interest rates come
two days after unknown gunmen attacked the coastal town of Mpeketoni on
Sunday, killing at least 60 residents. They also burnt buildings and
vehicles.
The attacks follow a series of gun and bomb attacks
in Nairobi and Mombasa that were expected to put pressure on the
Eurobond issue, including demands for higher interest rates by
investors.
“Advisers initially thought Kenya had missed the
most opportune window to turn to the international markets after the US
Fed began tapering its bond buying programme, which was expected to send
initial repayment rates higher than hoped,” said the official.
Analysts said the outcome reflected the abundance
of liquidity in global financial markets chasing yields, as well as
showing that confidence in Kenya’s diversified economy trumped worries
about attacks by Somali-linked Islamist militants.
“It shows that Kenya is a strategic investment
destination despite the security situation. They (foreign investors)
have faith in our currency,” a Nairobi-based bonds trader was quoted in a
Reuters report Tuesday.
Funds raised through the Eurobond will be used to
retire a $600 million (Sh52.2 billion) syndicated loan — for which Kenya
said last month it had received a three-month extension to the May
deadline — and for development projects.
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