Eurobond yields drop in early secondary trading

Kenya issued its most recent Eurobond last month raising Sh210 billion. FILE PHOTO | NMG 

In Summary

• CBK data shows five of the six tranches issued were all returning lower yields in the first week of June.
• The yields of 10-year Eurobonds for Ghana and Angola also declined during the week.
• Kenya issued its most recent Eurobond last month raising Sh210 billion.

By CHARLES MWANIKI
More by this Author

Secondary market yields on Kenya’s Eurobonds have trended downwards in the first week of June, indicating easing risk concerns over the economy by investors despite debt surge.

Nairobi has in the past five years issued three Eurobond — each with a dual tranche — whose yields in the market are a barometer of the risk-rating international investors attach to the country.

Data by Central Bank of Kenya (CBK) show five of the six tranches issued were all returning lower yields, the only exception being the five-year paper issued in 2014 that matures later this month.

“In the international market, except for the yield of the five-year Eurobond, which increased marginally, yields of Kenya’s seven-year, 10-year (2024), 10-Year (2028), 12-Year and 30-Year Eurobonds declined by 11.5, 14.7, 18.4, 15.9 and 17.5 basis points, respectively.

The yields of 10-year Eurobonds for Ghana and Angola also declined during the week,” said the CBK in its latest weekly bulletin.

In the bonds market, yields and prices are a good indicator of the risk associated with an investment and move opposite to each other.

When an asset’s risk rating is high, the price of the bond in the secondary market goes down, which in turn pulls up the yield.

A yield is, therefore, an indication of the rate at which investors would demand to be paid if the issuer were to return to the market with a new offer.

Public debt

Kenya’s economy officially grew by 6.3 percent last year, while the shilling has remained among the most stable against the dollar in the continent.

There have been concerns, however, on the rate the country has been contracting new debt, with the outstanding stock of public debt now above Sh5.4 trillion compared to Sh5.03 trillion a year ago.

Kenya issued its most recent Eurobond last month raising Sh210 billion ($2.1 billion) in two tranches of seven years (Sh900 million) and 12-years (Sh1.2 billion), at seven and eight percent respectively.

In the latest trading at the Irish stock exchange, the yields of the two tranches stand at 6.9 and 7.9 percent respectively.

The yields on the 10-year 2014 paper fell last week from 6.55 to 6.14 percent, while that of the 10-year 2018 issue was down to 7.45 percent from 7.91 percent.

The longer-dated 30-year paper issued in 2018 carried a market yield of 8.54 percent, down from 8.9 percent at the beginning of the week.