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Bonds post positive yields on polls week

Kenya’s five and 10 year treasury trading yields declined by 0.23 percentage points and 0.28 per centage points respectively last week as the country embarked on the General Elections.

According to the latest key monetary and financial indicators by the Central Bank of Kenya, the drop closed the week ending August 10, 2017 at 4.17 per cent and 6.28 per cent, respectively.

The yield posted during the election week is an indicator of strong investor confidence and is likely to enhance foreign investment.

A vote of confidence by international observers on the voting process is likely to back foreign investments.

Volume of local bonds traded declined by 14.62 per cent over the week ending within the same period with corresponding deals at 88 from previous week’s 98 deals.

This is an improvement compared to the 2007 and 2013 general elections, where the local bonds posted 65.88 per cent and 42.11 per cent drop respectively during the election weeks. Corresponding deals also fell to 54 from 145 the previous week within the same period.

The decline in both bonds is attributed to the shorter trading week, signaling favourable risk rating of credit quality of Kenya’s bonds in the international markets. Early this month, Central bank announced its plans to sell the five-year and 10-year Treasury bonds worth Sh30 billion this month.

In a price guide statement posted in the bank website, Central Bank said it would receive bids for the bonds between August 7 and 22 and auction the two bonds on August 23.

The five-year bond will have a market-determined coupon, while the reopened 10-year bond has a 12.96 per cent coupon.

With the Kenya shilling remaining relatively stable among major international and regional currencies, foreign debt cost is expected to reduce.

The first repayment on $2.75 billion (Sh285.64 billion) of Eurobonds sold in 2014 is due in the fiscal year that begins on July 1, 2018, which will lift the government’s external-debt repayments to $2.2 billion (Sh232 billion) by 2018-19 from 43.6 billion shillings in the fiscal year that ended June 30.

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