Zachary Ochuodho @zachuodho
Kenya’s sovereign bonds prices yesterday slid by 0.5 cents against the dollar (Sh5.18) in what was seen as a reaction to the announcement of National Treasury Cabinet secretary Henry Rotich arrest, Reuters reported yesterday.
Local investment analysts said if prices dip then yields (interest rise) will go up and the country will pay more to– service the debt. But on the flip side, high yields attract investors.
“Higher yields are one of the factors that attract foreign investors to a country. Of course, they also check whether the country investments are sustainable. So in the long run, the country will be an attractive investments destination if stable,” said Caleb Mugendi, Assistant Investment Manager at Cytonn Investments.
“Basically if yields rise, the country may pay more on any additional debt it issues from the market,” Mugendi added.
Treasury has issued Eurobonds which are set to mature in 2028, 2032 and 2048. Sterling Capital Director John Kirimi said the drop in prices on bonds means taxpayers will have to deal with higher costs of debt, this budget will have to allocate more to settle higher interest payments.
“The drop in the yields on the Eurobond may appear harmful to the economy in the short run, but overall, if it continues that would be good news for the economy and the taxpayer,” Kirimi said.
Meanwhile, the shilling yesterday exchanged at 103.3 to the dollar compared to103.2 on Friday, due to what the analysts said was oil importer demand and excess liquidity in the local money market.