Fed Raises 25bp to 3.75–4.00%: Higher US Rates and 10y Push External Funding Risk onto Long-Dated African Paper

The FOMC voted to raise the federal funds target range by 25bp to 3. 75–4. 00%. The decision accompanied a move in US benchmark long yields, with market commentary noting the 10‑year Treasury traded above 5%, lifting the global risk‑free discount rate that price schedules for USD sovereign issuance use. This is a discrete upward shift in the global funding baseline rather than a country‑specific shock. Higher US short and long yields transmit to African credit via three mechanics. First, the discount‑rate channel increases required returns on African Eurobonds; long‑dated maturities carry the largest duration hit, so 10y+ Ghana and Zambia paper will see the biggest mark moves and spread re‑pricing pressure as investors re‑assess carry versus US real yields.

Second, a firmer dollar and tighter global financial conditions raise external refinancing premia for importers and highly externalised borrowers: expect more immediate stress on importers’ short‑dated external amortisation (Kenya’s 2026–2028 curve belly and Egypt’s near‑term external bond slots) and on corporates with large US$ bills. Third, local currency pass‑through rises as reserve adequacy and FX liquidity tighten; currencies with limited FX buffers are more exposed to additional selling pressure, which in turn lifts local debt real yields and forces steeper local‑rate adjustments in the belly of curves where central banks respond. The move separates commodity exporters and importers. Oil and gas exporters (Angola, to an extent Mozambique’s gas projects) gain some cushion against FX pressure through commodity receipts, whereas cocoa‑and‑gold dependent Ghana faces dual pressure on USD Eurobonds and on local rates via import cost pass‑through and external rollover. Compared with Ivory Coast, which benefits from more limited pure sovereign external liability and regional support mechanisms, Ghana’s long‑dated Eurobonds and the sovereign curve belly are relatively more exposed to a US yield shock. What to watch next: the desk will track the 10‑year US trajectory and any Fed language altering the expected path of real yields; a further rise in US long yields would steepen African duration exposure and raise immediate refinancing premia for sovereigns with upcoming USD maturities, notably Ghana and Kenya in the 2026–2028 window.