Moody's recent comments on Kenya's planned buyback of its Eurobond debt as a default will not affect the country's next issue, an economic expert says.
In June, Kenya indicated plans to buy back Eurobond coupons at 11 per cent or below to refinance the maturing Sh280 billion ($2 billion) sovereign debt maturing in June next year.
The exchequer disclosed this to the Public Debt and Privatisation Committee as it also targets to keep par terms on rollovers in the new 2023-24 financial year.
A financial expert at Diamond Capital Jessica Juma insists that the slight jump in yields witnessed last week was nothing out of the ordinary, saying that they have actually eased from a high of 20 per cent in May.
"Moody's sentiment and a credit downgrade by S&P were negative. However, the rise in yields to 15.5 per cent for the 10-year Eurobond maturing next June cannot be directly linked to that,'' she said.
She explained the global financial market is extremely volatile due to increased geopolitics, high inflation and raised skepticism by investors, especially after Covid-19.
She added that Kenya has never defaulted on any international loan hence a great mark of confidence among investors.
"Kenya's Eurobond is always oversubscribed. Although we should not expect rates below 12 per cent, it won't go above 15 per cent,'' she said.
Despite Moody’s downgrade of the country’s foreign currency issuer ratings from B2 to B3 on May 12, analysts reckon the recent International Monetary Fund (IMF) affirmation of the country’s fiscal and monetary standing has eased jitters among Kenyan Eurobond investors resulting in the yields decline.
"We are, however, investigating if those sentiments contributed to the erosion of the country's currency, which has dropped significantly since Moody's comment,'' Juma said.
On Tuesday, the shilling was trading 143 units against the US dollar, with traders reporting to have bought the US currency at above Sh150 from banks and in the parallel market.
Yesterday, Bloomberg's market tracker showed that yields on Kenya’s Eurobonds increased by an average of 39.3 basis points, with the 2024 maturity rising by 92.7 basis points.
The yield on the 10- Year Eurobonds for Ghana and Angola also increased.
Kenya is planning to return to the Eurobond market this financial year and has since short-listed Citigroup, JP Morgan, Standard Bank and Standard Chartered Bank to sell the debt.
Kenya had initially planned to issue the bond in the past financial year but opted to shelve the plan owing to tight global financial conditions that saw the yield trend upwards and render the plan unviable from a pricing standpoint.
The comment by Moody's sparked condemnation from various entities, including the AU institution which is pushing for the Africa Network of National Regulators of Rating Agencies to institute appropriate regulatory measures to ensure proper conduct of credit rating business.