(NAIROBI, KENYA) – Kenyan Eurobond yields have fallen in recent weeks, resisting pressure from rising interest rates on similar instruments in advanced economies such as Japan and the United States, in a sign that Kenya can raise funds cheaply in international capital markets.
Yields on all but one Eurobond have declined since the US Federal Reserve raised its benchmark rate earlier this month, the first increase since July 2023, preserving debt affordability for Kenya as it prepares to return to the markets later this year with a new KES 105.8 billion ($815 million / GBP 622 million) Eurobond.
The 11-year Eurobond maturing in 2036 recorded the largest yield contraction of 0.165 percentage points, falling to 9.087% on 24th September from 9.252% on 15th September. The 12-year Eurobond maturing in 2038 also declined by 0.1 percentage points, while other Eurobonds recorded falls of between 0.041 and 0.09 percentage points. The 12-year 2032 Eurobond was the only one to rise, with its yield up 0.024% in the period.
The fall in Eurobond yields, which contrasts with rising rates in advanced economies, has been attributed to sustained appetite for risk among global investors and improved fundamentals for emerging and frontier economies such as Kenya.
“Compression of credit spreads has been broad-based but sharpest among low-rated sovereigns, aided by earlier Federal Reserve easing,” analysts at global credit rating agency Moody’s said in a note. “Despite renewed policy-tightening risks, recent balance-sheet repair, stronger policy frameworks and favourable commodity terms of trade support EM resilience.”
A credit spread is the extra yield or interest rate investors demand for holding a riskier bond with the same maturity date. In this case, it refers to the return offered by an instrument such as a 10-year dollar bond issued by Kenya compared with the return paid by a similar US bond.
Kenya has seen improved economic fundamentals over the past year despite emerging shocks such as the US-Iran crisis, with stability supported by recent credit rating upgrades.
In January this year, Moody’s upgraded Kenya’s long-term foreign currency sovereign credit rating from “Caa1” to “B3”, noting that the country’s near-term risk of default had fallen. The agency also said Kenya’s external liquidity position had improved, supported by higher foreign exchange reserves, a narrower current account deficit and a stable currency.
S&P Global Ratings also revised Kenya’s long-term sovereign credit rating from “B-” to “B” with a stable outlook in August last year, while the short-term sovereign credit rating was affirmed at “B”.
Since the start of the Middle East war in March 2026, Kenya has seen some fundamentals weaken, including the current account deficit, as costlier fuel inflates imports and widens the trade deficit. Other fundamentals such as the exchange rate have held steady, supported by resilient foreign exchange reserves recently boosted by the State’s sale of a 15% stake in Safaricom to Vodacom and proceeds from KES 97.2 billion ($750 million / GBP 572 million) financing from the World Bank at the end of June. Kenya’s foreign currency reserves closed last week at KES 1.95 trillion ($15 billion / GBP 11.4 billion), equivalent to 6.1 months of import cover.
The lower Eurobond yields are a key measure of debt affordability for Kenya in international capital markets as it prepares to issue a new Eurobond by December. The National Treasury annual borrowing plan for the 2026/27 cycle proposes an issuance of KES 105.8 billion ($815 million / GBP 622 million) in the second quarter of the current fiscal year.
Bond yields in advanced economies such as the US and Japan have jumped in recent weeks on worsening fiscal and inflation outlooks. Last week, the US 30-year bond hit its highest level since before the 2008/09 financial crisis, underlining investor demand for greater compensation.
The US Federal Reserve raised its benchmark rate for the first time in more than three years on rebounding cost pressures from the Iran war, while the country is also expected to fund a wider budget deficit. Higher US Treasury yields are expected to push up overall borrowing costs for emerging and frontier economies such as Kenya over the longer term.
“Despite narrower credit spreads, overall external borrowing costs for many emerging markets sovereigns remained steep because of large US debt issuance, higher real rates and a fading convenience yield-the value that investors place on liquidity and safety-have contributed to higher US Treasury yields and offset much of the benefit from spread compression,” Moody’s added.