More countries to follow Kenya's cue in issuing Eurobonds

The logo of the International Monetary Fund (IMF) at the organization's headquarters in Washington, DC.

More African countries are taking Kenya’s cue in issuing sovereign bonds in the international markets after the country’s successful Sh203 billion Eurobond.

The International Monetary Fund (IMF) said in its latest report 'several' African countries intended to issue sovereign bonds - debt security issued by a national government - valued at $4.4 billion (Sh440 billion) between April and June, this year.

The push, the global lender said, is spurred by improved global financial conditions and lower yields.

Kenya’s bond was issued in two equal tranches of 10 years at a coupon of 7.25 per cent and 30 years at a coupon of 8.25 per cent.

In 2017, Côte d’Ivoire, Nigeria, and Senegal issued sovereign bonds totalling $7.5 billion (Sh750 billion), or 10 times the level seen in 2016.

“Global financial conditions remain accommodative, prompting a strong rebound in the international sovereign bond issuance and sharp compression in yield spreads,” said IMF in its April 28 issue of the Regional Economic Outlook for Sub-Saharan Africa.  

According to the IMF, the global search for yield and increased appetite for sovereign bonds of the region’s frontier markets are also reflected in much narrower spreads - in absolute terms and in comparison to emerging markets as an asset.

The Bretton Woods institution said sub-Saharan African frontier markets’ spreads - or the difference between the bid and the asking price of a security or asset - are half of what they were at their peak of about 900 basis points in 2016.

They are also narrower compared to emerging markets as an asset class, where the premium has narrowed from almost 600 to about 150 basis points.

The IMF noted that between 2015 and last year, spreads compressed even for countries with high debt-to-GDP ratios.

In the first quarter of this year, Kenya was joined by Nigeria and Senegal to issue sovereign bonds amounting to $6.7 billion (Sh676.7 billion).