Nigeria Eurobonds Rally Further, Yield Slumps
The average yield on Nigerian government Eurobonds slid further as the buying momentum continued in the international debt market. There has been a switch in the foreign debt market; trading activity has been bullish in the space as the US 20-year treasury yield continues to swing sideways amidst the expected rate hike.
Ahead of the US Fed speech, the 10-year U.S. Treasury yield trades at 4.246%, up 1 basis point, according to Tradeweb. Jerome Powell is expected to speak today to set the direction for the market.
European Central Bank (ECB) president Christine Lagarde is also scheduled to be in Jacksonville to address market expectations. Fixed income securities traders noted that FGN Eurobonds saw appreciation across all tracked maturities, driving the average secondary market yield lower to 10.86%.
In the local foreign exchange market, the Naira strengthened against the US dollar at the Investors and Exporters (I&E) windows, trading at N771.69 from N773.43. However, the parallel market depreciated by 0.56% to N905 from N900.
The bearish sentiment in the oil market persisted amidst a weak demand outlook. Brent crude fell 0.22% to $83.03 per barrel, while WTI crude lost 0.19% to $78.74 per barrel.
Oil futures were lower as traders balanced China’s economic recovery uncertainty and the potential for increased production from Iran and Venezuela against a substantial US crude inventory draw
Elsewhere, gold was trading near $1,916 per ounce (+0.12%), boosted by increased dovish sentiment following disappointing US PMI data, which in turn exerted downward pressure on US treasury yields.
Long U.S. Treasury yields might have room to rise a little higher from current levels as the Federal Reserve might not have finished interest-rate rises, Jan von Gerich, chief analyst at Nordea, says in a note.
“Our baseline remains one where the Fed is not yet done hiking and will continue to have a tightening bias well into next year to ensure that inflation returns to the target,” he says. Nordea therefore thinks that long U.S. yields “could still climb a bit further,” von Gerich says.
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