Kenyan Eurobonds have fallen into single digit territory signaling the country's ability to tap funding from the international capital markets at lower interest rates. Yields on all six outstanding Eurobonds fell below 10 percent last week, mirroring the lower risk levels associated with Kenya's sovereign external debt issues.The return on the Sh116.3 billion ($0.9 billion) 2019 Eurobond maturing next year closed Friday at 7.1422 percent, while the Sh129.2 billion ($1 billion) Eurobond maturing in 2028 closed at a yield of 8.1295 percent. Eurobonds maturing in 2031, 2032, 2034 and 2048 similarly closed last week under the 10 percent mark at 9.3448 percent, 9.1544 percent, 9.1471 percent and 9.7891 percent respectively. The Eurobond yields have been on a downward trajectory in recent months, supported by a risk-off global environment mirrored by interest rate cuts in major Central Banks. “Eurobond yields have really collapsed, more so at the short end. The long-end yields are also lower and closer to levels seen in the pre-Russia-Ukraine conflict. Amidst the ongoing rate cycle, this would give potential issuers scope to tap the international markets,” noted IC Asset Managers Economist Churchill Ogutu.Kenyan Eurobond yields have moderated since early February when the papers' return swelled on investor jitters on a potential sovereign default. The partial buyback of the country's debut sovereign Eurobond maturing in June this year however helped restore investor confidence in Kenya while driving new foreign inflows to support the exchange rate.The fall in yields would allow the government to contract a new Eurobond, at comparatively lower costs should Kenya channel its commercial financing requirements or liability management operations to the international capital markets.Kenya had previously mulled issuing another Eurobond following that issued in February this year as part of liability management operations --likely to cover the February 2028 Eurobond redemption which bears a single bullet payment. A new Eurobond issue would nevertheless bear a higher yield in contrast to previously issued papers.Coupons on outstanding Kenyan Eurobonds except from the 2031 paper issued this year for instance range between 6.3 percent and 8.25 percent. The country would be better off waiting for interest rates in the international capital markets to fall further before considering a new Eurobond issue. “Fiscal authorities would need to exercise some patience before tapping the Eurobond market even for refinancing purposes. Even with the United Arabs Emirates (UAE) loan, securing the loan later in the second quarter of 2025 should give the authorities scope to get the financing at a much lower interest rate compared to the 8.25 percent in the cards,” added Mr. Ogutu .Kenya has been in discussions with the UAE for a Sh193.9 billion ($1.5 billion) commercial loan with the coupon set at 8.25 percent. The financing is expected to plug Kenya's external commercial financing requirements for the fiscal year running to June 2025. The country has leveraged concessional funding from institutions including the World Bank and the International Monetary Fund (IMF) to meet most of its external financing requirements in recent year (ICE NAIROBI)

Fonte notizia: Business Daily