Treasury opts to buy back Eurobond as maturity draws closer

This comes after the Kenyan government offered to buy back some of its tenders for Ksh. 2 billion dollars, just days after Ivory Coast and Benin returned to the international capital market for financing.

According to Churchill Ogutu, an economist with IC Group, Kenya's timing of the buyback is critical to boosting investor confidence, even as treasury officials consider another issuance.

“The fact that the government is offering to pay back investors, that in itself means that the government is able to pay back so its not an issue about willingness but the ability to, but the fact that there is a buy back coming into place shows and demonstrates the ability to pay back,” Ogutu told Citizen TV.

“Markets adjust to information very quickly, and that’s why I have been reiterating the fact that yields have really bounced back.”

In the tender offer, the government has invited eligible holders of its outstanding $2 billion bond to tender notes for purchase in exchange for cash, up to the maximum tender amount.

Ogutu now claims that this issue will alleviate any investor concerns, pointing out that the default risk was exaggerated. sentiments echoed by both the national Treasury principal secretary and the Central Bank governor.

“I know there have been some concerns about how we are going to deal with the maturing 2 billion eurobond in June, and I think that has led to a lot of uncertainty and people wondering whether the government will have enough reserves to be able to pay for that debt and where it will get those reserves,” Kamau Thugge, CBK governor, said. 

Although the government has not specified the amount it intends to buy back in the next seven days, experts say it could be targeting at least 50 percent of the two billion Eurobonds subject to investors' appetite.

With all indicators pointing to another Eurobond issue, experts note that Kenya could be using the buyback to boost investor sentiment before going back to the market with another issue.