(Bloomberg) -- Kenya is expected to sell seven-year Eurobonds with a yield of around 11%, higher than any other issue on the continent so far this year. The East African nation’s dollar bonds gained.

A bond maturing in February 2031 is likely to price on Monday, according to a person familiar with the matter, who asked not to be identified as they are not authorized to speak about the transaction. The proceeds will likely be used to finance the repurchase of as much as $2 billion in debt coming due in June.

“The market is positive about it from what it looks like right now,” said Lars Krabbe, portfolio manager at Coeli Frontier Markets AB. “It’s worth noting that Kenya still trades above 10% yield, which is normally the limit if you want to go to the market — so could be a bit expensive to issue here.”

Kenya mandated Citigroup Inc. and Standard Bank Group Ltd. as joint bookrunners for both the new notes and the buyback program.

Kenya issued $2 billion in Eurobonds in 2014 at about 418 basis points over US Treasuries. The spreads were trading at 588 basis points as of Friday’s close, according to JPMorgan data.

The yield on the 2024 note fell 54 basis points to 10.60% by 1:25 p.m. in London. The notes due 2048 fell 10 basis points to 10.51%.

“Perhaps the most interesting part in today’s transactions is how much of the new 2031 the authorities decide to issue,” said Simon Quijano-Evans, chief economist at Gemcorp Capital, in a note to clients.

Quijano-Evans said the larger the buy-back ahead of June, the less pressure the government would face in meeting its obligations. The nation has been making headway in finding money to address the principal, including plans to raise $500 million through a bond sale in Japan, and some support from the International Monetary Fund, the World Bank as well as a syndicated loan.

“The market is likely to show Kenya strong support today. The tender itself should turn into a self-fulfilling strategy, helping pull down the whole Kenya USD yield curve and gradually opening the way to new issuance at yield levels closer to 9% and even lower if UST yields were to oblige,” he said.

‘Outlook Negative’

Kenya has more than $3.5 billion of foreign-currency debt maturing this year and another $1.7 billion in external interest payments. It has another $2.7 billion coming due in the coming fiscal year that begins on July 1.

S&P Global Ratings on Friday affirmed Kenya’s rating at B with a negative outlook, saying the assessment reflects “risks to Kenya’s external debt-servicing capacity amid high external refinancing requirements.”

(Updates with Gemcorp quote; market moves.)

©2024 Bloomberg L.P.