Rank: Veteran Joined: 11/14/2006 Posts: 1,311
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muandiwambeu wrote:hisah wrote:shiznit wrote:hisah wrote:@mnandii, spot this KE eurobond yield rally! KES is going to get nailed very soon! I hope we won't go the Zambia way - praying for the currency after a nasty bloodbath! Those firms holding forex loans... And those that floated forex bonds... That eurobond trend should be a critical discussion in their finance departments.  @hisah, could you explain why that is so? I have problems understanding the relations behind debt yields and currency. Confidence in matters KE is on trial. Capital flight! Liquidity crunch follows. If gok or a corporate heads to the market now trying to sell debt the bond investors will be standing in line with a shotgun demanding higher rates! Where will the USD loot come from for international pay settlement? CBK can't print the USD. So they'll likely print KES to buy the scarce USD from the local market. And that's when sh** will hit the fan! Following keenly. All my senses seams to be in agreement, but sensitivity may vary.
As @Hisa says this is an "if" situation. At the moment the Shs has stabilized against the dollar and the CBK is in the market buying USD. I guess before the government decides to go for another Eurobond they have to consider many other factors. By the time the current Eurobond Loan matures, other factors like proceeds from tourism, horticulture, etc will come to play. The government can adjust interest rates again in future to stabilize the dollar. So I don't see much to be alarmed about from the the rise of the Eurobond yields.
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