Eurobond repayments ease from shilling gains, lower yields

Kenya is expected to spend less in meeting upcoming repayments for its outstanding Eurobond debt.

This is after marking gains from both a strengthened local currency/shilling and a deceleration in yields on the most immediate maturities.

For instance, the Kenyan shilling has marked gains of 1.2 per cent against the US dollar through the first half of 2021 to June largely as a factor of new dollar inflows from recently contracted debt.

A stronger local currency unit implies Kenya will be incurring a relatively lower cost in purchasing foreign currency used in servicing outstanding debt arrears.

On the same note, Kenya’s eight and 10-year tenured Eurobond issues which mature in 2027 and 2024 respectively have marked a 0.1 per cent and a 0.6 per cent decline in yields.

The cool-down in yields is largely attributable to increased investor confidence which is however against concerns emanating from the COVID-19 pandemic.

Nevertheless, yields on longer-timed Kenyan Eurobonds have increased, partly as a factor of a general decline in Eurobond issuance amidst increased investor appetites across recent months.

For instance, yields on Eurobonds maturing in 2028, 2032 and 2048 has registered gains of 0.2, 0.4 and 0.3 per cent respectively since the opening of 2021.

Kenya which had shunned taking on debt through Eurobonds for nea rly two years returned to the international capital markets earlier this year drawing Ksh.108 billion ($1 billion) for a tenure of 12 years.

Multilateral sources including the World Bank and the International Monetary Fund (IMF) have provided Kenya with cheaper financing options in between recent Eurobond issues.