African Sovereign Dollar Bond Yields Reach Record High.
Yields for Africa Sovereign Dollar Bonds, tracked by the Standard Bank Africa Sovereign Yield Index, have reached a record high of 9.15%, according to Bloomberg.
Why does this matter: In recent years, African nations have increasingly turned to the Eurobond market to secure funding needed to address budgetary shortfalls while continuing their economic reforms. After nearly two years of absence from international credit markets—due to global economic challenges and rising bond yields that made issuing bonds very expensive—these nations returned last year with record bond issues.
In 2024, Côte d'Ivoire, Kenya, Senegal, Cameroon, Benin, and South Africa collectively issued Eurobonds amounting to $10.6 billion, which attracted significant interest from investors and resulted in record oversubscription. This year, Benin is projected to be the first African country to return to the international credit market with a $750 million bond sale. However, due to rising yields, the government is reassessing the timing of this bond sale. Other African nations considering entry into the international credit market are also reevaluating their Eurobond financing strategies until market conditions become more favourable.
The bottom line: The issuance of Eurobonds has become a critical component of fundraising strategies for most African governments. This shift is aimed at diversifying funding sources beyond the International Monetary Fund (IMF) and other global financial institutions to effectively address ongoing budgetary challenges, even as economic reforms show positive trends. Pursuing international financing may lead to significant benefits, such as an influx of foreign exchange, especially when many African countries are experiencing currency devaluation. These governments should also explore the potential of increasing internally generated revenue by establishing efficient tax systems to ensure sustainable income at a lower cost.
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