- The National Treasury is confident that the loan which was taken at 6.7 per cent in 2014 will be cleared before the due date.
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The 36 basis point drop now puts the repayment rate at roughly 17 per cent.
Image: FILE
The Sh150 billion loan to Kenya by the International Monetary Fund (IMF) inspired confidence in international investors, leading to a drop in yields for the country's Eurobond due June 24.
The latest weekly bulletin by the Central Bank of Kenya (CBK) shows yields on Kenya’s Eurobonds declined by an average of 7.72 basis points, with the 2024 maturity declining by 36.2 basis points.
This is the first drop in the yields since December 13 when Kenya failed to honour a partial buyback plan that could have seen the country roll over at least 25 per cent of the $2 billion facility taken in 2014.
Although the apex bank did not give reasons for the drop, financial experts told the Star that Kenya was consolidating enough resources to settle the Eurobond loan on time.
"This was expected. Investors are watching. They reward according to the default risk profile. A higher risk leads to high yields and vice versa. The loan added to their confidence in the country,'' a lead partner at Nuru Capital, Sam Kaburu said.
He is supported by Jamleck Wangwa who hopes that the country clears the debt on time to free up the financial market.
"Yields on the bond did not only drop but the shilling also gained against major international currencies.,''Wanga said.
The yield on the inaugural Eurobond which had hit a high of 22 per cent in October dropped significantly to 16 per cent in early December last year following Kenya's promise to spend close to $300 million to execute the buyback.
"I can now confirm ... with confidence that we will and we shall pay the debt that has become a source of much concern to citizens and markets," Ruto said in his State of the Nation address to Parliament in November.
Failure by Kenya to honour the buyback plan saw the yields start rising again, hitting 18 per cent last week. The 36 basis point drop now puts the repayment rate at roughly 17 per cent.
The National Treasury is confident that the loan which was taken at 6.7 per cent in 2014 will be cleared before the due day.
The shilling has been gaining against the greenback since the country received a loan boost from the IMF, from 160.79 units on Thursday, 160.34 on Friday and 160.25.