Foreign Investors Offer up to Ksh 780B For Kenya’s Eurobond
Kenya’s new Eurobond offer has attracted more than Ksh780 billion (USD5 billion) in orders made by foreigners who are willing to invest in the securities.
The hike in offers has been triggered by expectations of lower interest rates in the United States, raising the demand for high-yielding bonds.
Kenya will accept Ksh234 billion (USD 1.5 billion) in offers for the seven-year debt at a 10.375 percent interest rate, this is the highest for an African state issuing a bond.
For instance, Benin sold 14-year securities at 8.375 percent, while Ivory Coast raised money at 8.5 percent.
Kenya will use part of the money raised to help service the Ksh321 billion ($2 billion) Eurobond which is set to mature in June this year.
“They decided to pay up to resolve the uncertainty related to this payment which was putting stress on the currency and domestic interest rates,” noted an economist.
Further, the new bond will also help lengthen the maturity duration of Kenya’s outstanding debt.
According to Treasury Cabinet Secretary Njuguna Ndung’u, combined transactions are a crucial part of the government’s strategy to smoothen the maturity profile of the 2024 Eurobonds and proactively manage debt liabilities.
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“This diversified financing approach aims to maintain a relatively low weighted average interest rate in the overall public debt portfolio, ensuring Kenya’s debt sustainability over the medium term,” the CS noted.
Initially, Kenya was targeting to raise Ksh156 billion (USD1 billion), even so, strong demand prompted the government to raise more than initially planned.
“The signaling effect of issuing bonds at such high yields will need to be carefully managed in the medium-term,” noted an economist.
The government’s move to access the new Eurobond has calmed investors’ anxiety over whether Kenya would be able to repay the one acquired in 2014 which matures in June.
Last week, Central Bank of Kenya Governor Kamau Thugge rubbished claims of the government defaulting on the Ksh321 billion Eurobond, giving an assurance that the government would make the repayments before maturity.
“We have the money that is coming from the international institutions and the risk of the Eurobond will be eliminated,” Thugge noted.
Foreign Investors Offer up to Ksh 780B For Kenya’s Eurobond