Eurobonds Still Fairing On With Mixed Reactions

In August, yields on the Eurobonds recorded mixed performance with the 10-year Eurobond issued in 2014, 10-year and 30-year issued in 2018, and 12-year bonds issued in 2019 and 2021 all declining by 0.2 percentage points to 3.1, 5.0, 7.1, and 6.0 percent.

On the other hand, the 7-year Eurobond issued in 2019 remained unchanged at 4.6 percent.

During the week, the yields on the Eurobonds were on a downward trajectory. The yields on the 10-year Eurobond issued in 2014 and 2018 decreased by 0.1 and 0.4 percentage points to 3.1 and 4.9% percent

The yields on the 30-year Eurobond issued in 2018, 7-year and 12-year Eurobonds issued in 2019 all declined by 0.2 to 7.1 percent, 4.6 and 6.0 percent, respectively.

The money markets remained liquid in the month of August, with the average interbank rate declining to 3.2 percent, from 3.9 percent recorded in July mainly supported by government payments inclusive of Kshs 305.9 bn Term Auction deposits maturities (TADs).

During the week, liquidity in the money market eased, with the average interbank rate declining marginally to 3.4 percent, from 3.5 percent recorded the previous week, due to government payments, TADs maturities worth Kshs 43.0 bn which offset the settlements of government securities and tax remittances.

The average interbank volumes traded increased by 45.7 percent to 11.2 billion shillings, from 7.7 billion shillings recorded the previous week.

Rates in the fixed income market have remained relatively stable due to the sufficient levels of liquidity in the money market, coupled with the discipline by the Central Bank to reject expensive bids.

The government is 33.8 ahead of its prorated borrowing target of 126.6 billion shillings having borrowed 169.5 billion shillings of the 658.5 billion shillings borrowing for the FY’2021/2022.

“We expect a gradual economic recovery going into FY’2021/2022 as evidenced by the KRA July collections of 267.1 bn compared to the monthly prorated amount of 266.0 billion shillings,” said Cytonn.

However, despite the projected high budget deficit of 7.5% and the lower credit rating from S&P Global to ‘B’ from ‘B+’, we believe that the monetary support from the IMF and World Bank will mean that the interest rate environment may stabilize since the government will not be desperate for cash