Kenya urged to issue a fresh sovereign bond

Money Markets

Rich Management chief executive Aly-Khan Satchu. PHOTO | SALATON NJAU 

By OTIATO GUGUYU

In Summary

• Kenya, which hinted that it will go into the international market to raise a Eurobond soon also faces the threat of a hike in United States key interest rate, which could happen this month during the Federal Open Market Committee meeting.

Financial analysts say time is ripe for the National Treasury to access cheap dollar debt on the international market after Ghana issued a $750 million Eurobond last Thursday at a yield of 9.25 per cent.

Accra badly needed cash to balance the budget before elections in December but had been unable to raise funds, even aborting an attempt to launch the bond in August because investors were demanding higher than expected yields.

Analysts see last week’s sale that was oversubscribed with orders exceeding $4 billion as a masterstroke of good timing post Brexit.

“Kenya needs to take its opportunity with both hands and immediately. Kenya has seen yields on its 10-year dollar euro bond fall dramatically to just around 7 per cent, this is an outstanding level [add 50 basis points for a concession and you get a rate around 7.6 per cent] for the Treasury CS to fill his boots,” CEO advisory firm Rich Management Ltd Aly-Khan Satchu said.

International Monetary Fund Country Representative Armando Morales told Bloomberg news that Kenya must get all the financing it needs well ahead of elections, analyse the Fed very carefully and be prepared to act on the sale as soon as the market allows.

Push up debt yields

Kenya, which hinted that it will go into the international market to raise a Eurobond soon also faces the threat of a hike in United States key interest rate, which could happen this month during the Federal Open Market Committee meeting.

Mr Satchu, however, said that at 9.25 per cent Ghana’s bond could push up debt yields for emerging economies. The international market treats most African countries as peers of Ghana and its rate an indication of the price investors would pay for an African bond.

Yields on Kenya’s Eurobond securities due 2024 fell to 7.12 last month although analysts see the market demanding upwards of 8 per cent if Nairobi was to go back to the market.

READ: Kenya suspends to list Eurobond on NSE

Kenya, which is considered a safer bet due to a diversified economy that has not been hit by fall in commodity prices, is also in need of borrowing Sh462 billion ($4.6 billion) to plug its budget deficit before next year’s polls.

The country raised $2.82 billion in a debut Eurobond sale in 2014. The bond has been hit by controversy with the political opposition alleging misuse and lack of accountability in the transfer of funds from abroad.

 @googooyuh
dotiato@ke.nationmedia.com