Kenya Shilling And Eurobonds Drop Amid The Arrest Of Finance CS Henry Rotich

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The yield on the 10-year Eurobond issued in 2014 dropped by 0.2% points to 4.9%, from 5.1% recorded the previous week. The continued decline in yields has been attributed to increased demand for emerging market fixed-income securities in the wake of the pause by the US Fed on its three-year cycle of tightening its monetary policy, which had made returns from fixed income securities more attractive.

For the February 2018 Eurobond issue, yields on both the 10-year and 30-year Eurobonds dropped by 0.2% points to 6.3% and 7.6%, from 6.5% and 7.8% recorded the previous week, respectively.

Dual -Tranche Eurobond

For the newly issued dual-tranche Eurobond with 7-years and 12-years tenor, priced at 7.0% for the 7-year tenor and 8.0% for the 12-year tenor, respectively, the yields on the 7-year bond and the 12-year bond dropped by 0.1% points to 6.1% and 7.0%, from 6.2% and 7.1% recorded the previous week, respectively.

According to Henry Rotich, Some of the funds raised from the new issue will be used to refinance a maturing 5-year dollar denominated bond that was issued in June 2014.

It is noteworthy that yields for all Kenya Eurobonds dropped during the week, at the same time the Kenya Shilling depreciated by 0.7% against the US Dollar to close at Kshs 103.8, from Kshs 103.1 the previous week, with the shilling hitting a 3 year low of Kshs 104.0, partly driven by uncertainty caused by Monday’s announcement that the Treasury Cabinet Secretary would be charged with financial misconduct, coupled with a relatively liquid money market.

This is an indicator that international bond investors are taking the changes in stride, especially given that the President was quick to appoint their replacements.

Liquidity

Liquidity in the market remained favorable during the week attributable to the government payments as well as effects emanating from the ongoing demonetization process. This was despite the average inter-bank rate rising slightly to 2.4%, from 2.1% recorded the previous week. The average volumes traded in the inter-bank market declined by 20.8% to Kshs 8.2 bn, from Kshs 10.4 bn the previous week.

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Melissa Daniels
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