Kenya's sovereign debt costs are creeping upward again, with Eurobond yields edging higher by 2.63 basis points this week, signaling shifting global sentiment just as Treasury considers a new issuance.

The calm waters of the international capital markets are beginning to chop. After a period of relative stability following the successful 2024 buyback, Kenya's Eurobond yields have registered an uptick. This increase comes at a delicate moment: Finance Minister John Mbadi has just hinted that the government is "weighing a strategic return" to the Eurobond market before the close of the financial year in June 2026.

For the Kenyan taxpayer, this technical financial metric translates to a hard reality: if the government borrows now, it will cost more. And when the government pays more, the squeeze on domestic development spending tightens.

The Mbadi Doctrine

Speaking on Wednesday, February 11, Cabinet Secretary John Mbadi described the potential issuance as a "liability management operation." The goal is to smooth out the repayment curve for debt maturing in 2027 and 2028. "It might be an ideal time to go to the market," Mbadi suggested, though he cautioned that no final decision had been made.

However, the market seems to be reacting to this uncertainty. The 2.63 basis point rise reflects investor anxiety. Is Kenya borrowing to invest, or borrowing to pay Peter so it can pay Paul? The "Ponzi financing" accusation, often leveled by critics, hangs heavy over these discussions.

Global Headwinds

The shift in sentiment is not entirely homegrown. Global inflation data, particularly from the US, has tempered hopes for aggressive interest rate cuts by the Federal Reserve. When rates stay high in the US, risky frontier markets like Kenya suffer as investors demand higher returns (yields) to lend them money.

• The Move: Yields up ~2.63 basis points.
• The Trigger: Global risk-off sentiment + Local issuance rumors.
• The Debt Pile: Public debt stood at KES 11.81 trillion ($91.5bn) as of June 2025.
• The Strategy: Borrow new money to pay off old bonds (refinancing).

The IMF Factor

Adding to the complexity is the expiry of the previous IMF program in April 2025. Negotiations for a new facility are ongoing but have not been finalized. Without the IMF's "seal of approval," international investors are naturally more skittish, demanding a higher risk premium.

Kenya successfully navigated the "fiscal cliff" of the 2024 Eurobond maturity, but the mountain of debt remains. The strategy of rolling over debt works—until the music stops.

"We are not desperate, but we are prudent. We will only enter the market if the price is right," a Treasury official insisted, attempting to calm the very jitters that the yields are now pricing in.