Nigeria’s Eurobond yield rises to 9.6% as foreign investors adjust

In Nigeria’s sovereign Eurobond market, sell pressure across the short, mid, and long ends of the yield curve resulted in a 0.13% rise in the average yield, reaching 9.6% in the just concluded week.

The market has been adjusting to US Fed rates slash, while the local authority increased benchmark interest rate to 27. 25% in Sept kick started some portfolio adjustment in the market.

Macroeconomic data suggests Nigeria’s economic is going positive in terms of disinflation and economic growth. However, the risk off sentiment on Nigeria’s sovereign Eurobond was spurred by sentiment.

But analysts have predicted an increase demand for sovereign Eurobond due to its strong yield positions in the international capital market versus US Treasury yield.

U.S. yields fell on Friday after data showed inflation in the world’s largest economy continued to ease, boosting the chances of yet another larger interest rate cut at the Federal Reserve’s November policy meeting.

According to fixed income traders, the African Eurobond market had a positive start last week, driven by optimism following the US Federal Reserve’s interest rate cut.

Analysts have started to project flood of hot monies coming to African economy in the coming months. Additionally, news of China’s stimulus package led to a significant rally in the Asian markets, impacting the African Eurobonds, AIICO Capital Limited said.

The foreign bonds market ended negatively due to a substantial decline in oil prices caused by the possibility of increased oil supplies from Saudi Arabia, overshadowing China’s efforts to stimulate its economy and few profit takings.

Overall, the average mid-yield on the Nigerian bond curve increased by 27 basis points week-on-week, reaching 9.6%.

In the FGN bond market, the average yield across tenors rose 7 basis points to 18.5% owing to bearish repricing in the over the counter market.

US 10-Year bonds offer a balance of higher interest rates and lower volatility, suitable for cautious investors seeking long-term gains and portfolio diversification.

The yield on the 10-year US Treasury note held its recent decline to around 3.75% on Monday as soft US economic data reinforced expectations of further Federal Reserve rate cuts.

China’s 10-year government bond yield surged to around 2.21%, reaching a three-week high, as investors reacted to the latest PMI reports.

Australia’s 10-year government bond yield held steady at around 3.98% as investors continued to assess the Reserve Bank of Australia’s monetary policy outlook.