The heightened demand for bonds was reflected in the recent Kenyan Eurobond offering which garnered over $5 billion in subscriptions. 

According to Bloomberg, Kenya will issue $1.5 billion worth of seven-year bonds at a rate of 10.375%, marking the highest coupon payment made by an African issuer this year. 

According to the report by Bloomberg, the Kenyan government plans to utilize the funds raised to facilitate the redemption of $2 billion worth of securities reaching maturity in June. Additionally, the issuance of these new bonds will extend the average maturity period of Kenya’s existing debt portfolio.  

Although the pricing fell below the initial guidance of approximately 11%, it remains notably higher compared to the rates at which other African sovereigns have issued debt this year. For instance, Benin issued a 14-year instrument at 8.375%, while Ivory Coast secured funds at 8.5%. 

What you should know

Kenya has faced financial strain with approximately $5.2 billion in foreign debt obligations, encompassing both principal and interest payments due this year, with an additional $2.7 billion set to mature in the upcoming fiscal year. 

To fulfil its refinancing requirements, Kenya needs market access to avoid drawing down $7.1 billion of foreign-exchange reserves. Using these reserves to pay off the debt maturing in June would have had a negative impact on the country’s economic indicators, particularly its credit metrics, potentially weakening its financial position. 

With an anticipated cut in interest rates by the US Federal Reserve, there has been heightened demand for bonds with heavy interest rates. For example, Benin Republic’s 14-year USD bonds issued at a rate of 8.375% received an oversubscription of $4.25 billion.  

Cote D’Ivoire’s sustainable and conventional notes which were issued at 7.875% and 8.5% respectively received an overall subscription of $8 billion, while $2.6 billion was raised, representing a total oversubscription of $5.4 billion.