A Look At The Performance Of Kenyan Eurobond

During the week, the yields on all the Eurobonds declined, as the market corrected from the sharp increase recorded during the last two weeks of March 2020.

The trend, according to a report by Cytonn Investments, was replicated in the performance of other Sub-Saharan African Eurobonds. According to Reuters, the yield on the 10-year Eurobond issued in June 2014 declined by 0.7 percentage point to 7.6 percent, from 8.3 percent recorded the previous week.

During the week, the yields on the 10-year and 30-year Eurobonds issued in 2018, declined by 0.7 percentage points and 0.5 percentage points to 7.9 and 8.6 percent respectively, from 8.6 and 9.1 percent recorded previous week.

During the week, the yields on the 7-year and 12-year Eurobonds issued in 2019 both declined by 0.6 percentage points to 7.9 and 8.6 percent respectively from 8.5 and 9.2 percent respectively recorded the previous week.

Africa’s appetite for foreign-denominated debt has increased in recent times with the latest issues in Q1’2020 being Gabon and Ghana, Q1’2020 saw the Sub-Saharan Region raise USD 4.0 billion through Eurobond issues.

The new instruments attracted a lot of interest as evidenced by the oversubscription in all the issues, with the Ghana issues recording the highest oversubscription of over 4.7x.

This underlines the demand by premium investors to hold riskier assets, partly because, by comparison, African sovereign debt offers the highest yields to investors globally.

Eurobond yields in Sub Saharan Africa increased in Q1’2020, attributable to the COVID-19 health crisis, with investors attaching a higher risk premium on the affected regions due to the anticipation of slower economic growth.

The Eurobond window for Sub-Saharan Africa is effectively closed for now given the strong drop in commodity prices that has led to the region underperforming emerging market peers, and also because investors have a current preference for safe havens.

During the week, liquidity in the money markets tightened, with the average interbank rate increased marginally to 5.3 percent from 5.2 percent the previous week.

The marginal rise was due to demand as banks raised funds for tax payments with Pay as You Earn (PAYE) due on Thursday 9^th April. The average interbank volumes declined by 10.0% to Kshs 7.4 bn, from Kshs 8.2 bn recorded the previous week.

READ: More Debts Ahead: Kenya Floats another Ksh 250 Billion Eurobond