Foreign Investors Trim Nigeria Eurobonds Holding, Yield Heats Up

Foreign Investors Trim Nigeria Eurobonds Holding, Yield Heats Up

Foreign investors trimmed their interest in Nigeria Eurobond in the market midweek amidst uncertainties in the global economy. Nigeria is facing turbulent time as key macroeconomic indicators continue to cast doubts on effectiveness of government policy in about a year.

Inflation accelerated to 33.69% in April while Broadstreet analysts are projecting that consumer price index will worsen further in the coming months. Past GDP data indicates that economic growth has been receding while public debt has peaked to decades high.

The devaluation of the naira and subsequent inability of the monetary policy to boost FX liquidity across forex market has worsened the purchasing power of the local currency. Political risk remains moderate and acceptable but the economic outlook is clouded with unpriced risk.

Today, the sovereign Eurobonds market sustained its negative sentiment, particularly in the FEB-38, NOV-27, and SEP-33 maturities, according to Cowry Asset Management Limited.

Due to selloffs on asset by foreign portfolio investors, the market recorded a marginal increase in the average yield to 9.78%. Elsewhere, the 10-year US Treasury yield rose 0.019 percentage point to 4.433% today. Yield is up four of the past five trading days.

Treasury yields remain above yesterday’s settle after the Fed minutes corroborate the narrative that upcoming data will determine future monetary policy moves. >>> Naira Rises by 19% as Forex Market Pressures Ease

“Members agreed that they did not expect that it would be appropriate to reduce the target range until they have gained greater confidence that inflation is moving sustainably,” down to 2%, the minutes say.

“Participants assessed that demand and supply in the labor market, on net, were continuing to come into better balance, though at a slower rate” and they “noted that recent indicators suggested that economic activity had continued to expand at a solid pace.” The 10-year yield is at 4.432% and the two-year at 4.871%.