Kenya Eurobonds Jump After IMF’s Support for ‘Vigorous Action’

Kenya Eurobonds Jump After IMF’s Support for ‘Vigorous Action’

• IMF Managing Director holds talks with Kenyan authorities
• Funding from lenders alleviates investor concerns on default

Yields on Kenya’s eurobonds eased in Thursday trading after the International Monetary Fund’s chief said she’s impressed by economic programs in the East African nation and ready to support them.

“Impressed by the vigorous actions to keep the economy vibrant in the face of external headwinds,” IMF Managing Director Kristalina Georgieva tweeted late Wednesday after meeting Kenyan President

“The IMF stands with Kenya.” Yields on Kenyan eurobonds due 2048 rose almost 2 cents to about 68 cents on the dollar, their biggest move since March, according to data compiled by Bloomberg. The yield dropped to 12.4%, down from a high of more than 16% last July.

“Impressed by the vigorous actions to keep the economy vibrant in the face of external headwinds,” IMF Managing Director Kristalina Georgieva tweeted late Wednesday after meeting Kenyan President William Ruto in Nairobi. “The IMF stands with Kenya.”

Delighted to meet President @WilliamsRuto. Impressed by the vigorous actions to keep the economy vibrant in the face of external headwinds. The IMF stands with Kenya. pic.twitter.com/wjvkN7BDM7

— Kristalina Georgieva (@KGeorgieva) May 3, 2023

Yields on Kenyan eurobonds due 2048 rose almost 2 cents to about 68 cents on the dollar, their biggest move since March, according to data compiled by Bloomberg. The yield dropped to 12.4%, down from a high of more than 16% last July.

The IMF’s verbal support for the government’s efforts to shore up its finances come at an important time for Eastern Africa’s second-largest economy, with investors increasingly questioning whether it could be the next emerging market headed toward default.

READ MORE: Investors Are Unloading Kenyan Bonds as Default Fears Rise

Kenya delayed paying civil servants’ wages for March amid financing constraints, as it prioritized debt payments. The nation has also halted new road projects as unpaid dues owed to contractors ballooned, and foreign-exchange reserves have fallen below its four months’ import-cover target since January.

Debt Distress

As concerns about Kenya’s finances intensified last month, the extra yield investors demand to hold its debt over US Treasuries has moved to the 1,000 basis-point threshold that investors consider “distressed.” The spread was 988 on Thursday, according to intraday pricing on a JPMorgan emerging-market index. The Kenyan shilling has lost about 10% against the dollar so far this year.