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Kenya’s Oversubscribed Eurobond Opens Flood Gates For More African Issues

Kenya’s Oversubscribed Eurobond Opens Flood Gates For More African Issues

Written by Robert Brand and Jaco Visser | From Bloomberg

Kenya’s Eurobond sale is showing the way for more sub-Saharan African nations to follow as the Federal Reserve and European Central Bank signal borrowing costs will remain low.

Ghana, Ivory Coast, Rwanda and Senegal say they’re weighing foreign-currency debt, while the Republic of Congo said this week it plans to sell $1.5 billion of credit-linked notes to European investors. The yield on Kenya’s 10-year security has fallen 46 basis points to 6.41 percent since being announced on June 16, narrowing the premium over similarly dated U.S. Treasuries by 47 basis points to 381.

With interest rates in the U.S. and Europe unlikely to rise soon, issuers have time to obtain low funding costs before the global economic recovery brings an end to stimulus that drove gains in emerging-market debt. The average yield on African dollar bonds dropped to a one-year low on May 29, JPMorgan Chase & Co. indexes show.

“The exceptionally low yields on frontier debt at present are likely to spur potential issuers into action,” Melissa Verreynne, an analyst at NKC Independent Economists in Paarl, South Africa, said by e-mail yesterday. “There is an opportunity to lock in favorable borrowing costs.”

Issuance in sub-Saharan countries may reach $6 billion this year, Fitch Ratings said in January. A first-time offering by Rwanda and sales by Nigeria and Ghana were among the record $6.25 billion sales in 2013.

Read more at Bloomberg