Kenya Plans to Issue $1Billion Eurobond by July

Kenya has reversed its initial plan to scrap plans of issuing a Ksh 124.3 billion ($1.1 billion) Eurobond in the fiscal year closing in June.

According to National Treasury Cabinet Secretary Ukur Yatani, the sovereign bond issue remains part of the fiscal deficit financing plan for the current financial year.

“We are issuing (the Eurobond) because it’s part of our financing, so we are doing it,” Treasury Cabinet Secretary Ukur Yatani said on Thursday

Last week, the Treasury disclosed the potential of skipping the issuance on the backdrop of rising interest rates in the international capital markets.

“The international capital market conditions are unfavourable with elevated yields on traded securities and there is a likelihood of not issuing Eurobond in the current fiscal year,” the exchequer stated.

According to data from the Central Bank of Kenya (CBK) for the week ending April 29, yields on existing Kenyan Eurobonds rose by between 0.3 and 0.9 per cent.

Kenya raised $1 billion in 12-year bonds last year priced at 6.3% and turned down $4.4 billion in orders.

However, according to a report by Bloomberg, the timing for the new bond is poor given the backdrop of global rate tightening, widening deficits, investors’ concerns about its debt position, as well as elections scheduled for August.

Disruptive events, including Russia’s invasion of Ukraine and Covid-19 lockdowns in China, have further complicated investment plans around the world. 

“This back and forth is unlikely to reassure investors, and sovereign dollar bond yields are likely to climb higher, setting the scene for unfavorable coupon terms,” Virag Forizs, Africa economist at Capital Economics as quoted by Bloomberg.