Nigeria’s US Dollar Bond Yield Rises on Risk-Off Sentiment
Risk-off sentiment in the international bond market triggered a selloff on Nigerian government US dollar bonds, traders said in their separate notes.
As a result, there was a shift in the yield curve. Nigeria’s sovereign US dollar bond benchmark yield rising by 2 basis points to 10.33% ahead of inflation data.
In the US, Treasury yields were marginally higher with prices weighed down by upcoming government and corporate bond issuance, and investors’ anxiously awaiting key inflation reports this week.
The U.S. Treasury sold $52 billion in three-year notes on Tuesday, picking up a high yield of 4.105%, lower than what the market expected at the bid deadline, suggesting investors absorbed the note without a premium.
There was $139 billion in bids for a 2.67 bid-to-cover ratio, a demand gauge, better than the 2.42 last month but fractionally below the 2.69 average.
U.S. 10-year notes and 30-year bonds are on tap for sale on Wednesday and Thursday. Treasury yields briefly pared gains after the auction but came back higher again.
In its market update, Cowry Asset Limited notified that there was an increase of 0.02% in the average yield to 10.33%. This appears to be a similar development in the market in the previous day.
MarketForces Africa reported that selloffs witnessed in the Eurobond market on Nigeria’s sovereign asset had triggered an increase of 0.31% in the average yield to 10.45%. Dangote Reacts to EFCC Visit to Headquarters
This came in contrast to early development in the space. The market had seen buying interest in Nigeria’s US dollar bonds; supported by improved market sentiment amidst positive expectations that Africa’s largest economy would grow further in 2024.
The World Bank projected Nigeria’s economy to grow at 3.3 per cent this year, about 0.4 percentage points higher than the 2.9 per cent it was expected to have closed last year.
The projection is slightly behind that of sub-Saharan Africa (SSA), which is to expand by 3.8 per cent but far modestly above the estimated global average (2.3 per cent)
In the local bond market, trading activity was slightly positive, particularly attributed to a yield reduction of 92bps in the MAR-24 FGN paper, thus dragging the average yield by 0.21% to close lower at 13.51%.
The buying activities experienced in the over the counter market was backed by strong liquidity in the money market. This kept short-term benchmark rates lower.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), decreased by 2.42% and 1.50% to close lower at 4.63% and 7.00%, respectively.
