African Countries Cautiously Return to Bond Markets But Face Risks of High Debt and Investor Volatility
• Kenya recently issued a new $1.5 billion bond at a high 10.4% yield to repay existing debt obligations, kicking payments down the road 7 years.
• African governments are tentatively returning to international bond markets after a 21-month absence due to high interest rates. Ivory Coast and Benin recently issued new bonds.
• Investor appetite for African bonds follows expectations that the U.S. Federal Reserve will cut interest rates, sending some capital back to higher-yielding markets like Africa.
• But most African countries still face prohibitively high yields on new bonds, while facing walls of debt repayments soon. Some countries like Zambia and Ethiopia have already defaulted.
• Until African governments can generate more revenue and exports, they will remain vulnerable to swings in investor sentiment and face high borrowing costs compared to alternatives.