Kenyan Government Re-opens Two Bonds For Budgetary Support

Last week, the Kenyan government re-opened two bonds (FXD 2/2010/10 and FXD 1/2009/15) with effective tenors of 3.4 and 7.4 years and coupons of 9.3 percent and 12.5 percent respectively in a bid to raise 40.0 billion shillings for budgetary support according to Cytonn Investments in their report.

The market average rates for the bids came in at 12.6 percent and 13.4 percent while the average yields of the accepted bids were 12.5 percent and 13.1 percent for the two bonds respectively.  The government did not accept expensive bids having only accepted 20.0 billion shillings out of the 38.8 billion shillings worth of bids received, translating to an acceptance rate of 51.5 percent.

According to Bloomberg, yields on the 5-year and 10-year Eurobonds, with 2.2 years and 7.2 years to maturity declined by 10 bps w/w for both bonds, to close at 3.9 percent and 6.4 percent from 4.0 percent and 6.5 percent the previous week respectively.

Since the mid-January 2016 peak, yields on the Kenya Eurobonds have declined by 4.9 percent points and 3.2 percent points respectively for the 5-year and 10-year Eurobonds due to stable macroeconomic conditions.

The declining Eurobond yields and Standard & Poor’s (S&P) having maintained Kenya’s foreign and local currency sovereign credit ratings for the short and long term at “B+/B”, respectively, are indications that Kenya remains stable and hence an attractive investment destination.