The risk associated with Kenya’s first Eurobond, which is due later this year, has increased due to the country’s inability to fulfill a previously promised buyback, resulting in a significant rise in yields by 200 basis points.
According to the Central Bank of Kenya’s (CBK) weekly report, the yields on Kenya’s Eurobonds saw an increase for the first time since November.
This occurred after President William Ruto announced that his administration would implement a buyback plan worth $300 million by December 2023.
According to the CBK, the yields on Kenya’s Eurobonds rose by an average of 81.10 basis points in the global market.
Specifically, the yields on the bond maturing in 2024 saw an increase of 200.90 basis points. The yields on the 10-year Eurobonds for both Angola and Zambia also saw a rise.
The yield rate on the $2 billion bond issued in 2014, which is due on June 24, 2024 this year, increased by 201 basis points. This brought the absolute yield rate to 16 percent, a significant increase from the 13 percent reported before Christmas, which was a 15-month low.
However, just two days before the year ended, the National Treasury made a payment of $68.7 million (Ksh.10.8 billion) on the bond. This deviated from the initial plan to make an advance payment of the principal before the end of 2023.
“Indeed, the government planned to undertake the buyback before the end of December 2023. The decision as to when to access the market shall be guided by the government-appointed joint lead managers and legal counsels based on the market conditions,” tsaid National Treasury in a statement.
The government had intended to carry out the buyback before end of the year last year.
The timing for accessing the market will be determined by the government-appointed joint lead managers and legal counsels, based on market conditions, as stated by the exchequer in a public announcement.
In a separate statement, the National Treasury CS Njuguna Ndung’u mentioned that the country is expecting substantial external inflows from the World Bank, IMF, and other Development Finance Institutions.
These inflows are also anticipated from key bilateral partners between January and March 2024.
Treasury is also waiting on a $500 million facility from TDB. Kenya largely relied on this amount to execute the buyback but was delayed.
