The Brief: Kenya's $1.5 billion Eurobond at 9.75% heightens consumer tax risk

The Event

On February 12, 2024, Kenya re-entered the global market by issuing a new eurobond, marking its first issuance since 2021. The issuance of the new eurobond attracted substantial interest from investors, with orders exceeding $5 billion. Kenya opted to accept only $1.5 billion of the new seven-year debt, offering a coupon and yield of 9.75% and 10.375%, respectively. 

The government's objective is to utilise the funds from this eurobond to repurchase the 10-year $2 billion (Kes 321 billion) Eurobond set to mature in June 2024. The heightened demand was mainly due to the anticipation of lower interest rates in the US, which made high-yield securities like Kenya's bonds more appealing. With this issuance, Kenya has initiated the retirement process for the $2 billion Eurobond, utilising additional funds obtained from bilateral lending, thereby alleviating concerns about default.

Our Take

The recent issuance of a new bond by the Kenyan government, though aimed at