Capital Markets

Eurobond yields slide continues on demand

President Uhuru Kenyatta with Member of Parliament for Portsmouth North and Secretary of State for International Development (DfID) Penny Mordaunt and the Chairman of the London Stock Exchange Group Donald Brydon, when he opened the market at the London Stock Exchange. FILE PHOTO | NMG 

Yields on Kenyan Eurobonds further fell in the past week to continue a trend charted since the beginning of the year, showing that the demand for the instruments has risen during the period.

Analysts said the fall is also an indication of the macroeconomic stability of the country in recent times, even as they pointed out that the prices are still below 100 units that amount to discount.

For Kenyan high net worth individuals and institutions, the attraction of the Eurobond would be in the protection against swings in the value of the local unit.

“With the risk in the local currency, high net worth individuals, for example, would benefit from holding Eurobond as a way to protect themselves against that risk,” said Edwin Chui, research analyst with Dyer & Blair Investment Bank.


“The bonds are also still at prices below 100 meaning they are at a discount and people can buy them. So they are in demand. The market is also digesting what a new Eurobond issue means,” said Mr Chui.

For the five-year bond that is due for redemption in June, the yield stood at an average of 4.569 percent for the week that ended on January 24 compared to 4.646 per cent in the previous week.

For the 10-year bond due for repayment in 2024, the yield was at an average of 7.006 percent for the week relative to the 7.444 percent of the previous week.

The other 10-year bond was floated early last year and is to be redeemed in 2028, the yield fell to 7.632 percent from 8.135 percent average of the week that ended on January 17.

This is the Eurobond issue that had the biggest one-week downward change — amounting to 0.503 percent — among the four listed ones.

The 30-year bond due for repayment in 2048 saw its yield fall to 8.762 percent on average compared to 9.097 percent in the previous week.

The changes in yields on the bonds is even bigger considering the current ones and the peak levels in 2016, an analysis by Cytonn Investments shows.

“Since the mid-January 2016 peak, yields on the Kenyan Eurobonds have declined by 2.6 per cent points and 4.7 per cent points for the 10-year and 5-year Eurobonds, respectively, an indication of the relatively stable macroeconomic conditions in the country,” said Cytonn.

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