Yield Slides as Foreign Investors Hunt for Nigeria’s Eurobonds
The average yield on Nigeria’s Eurobonds declined as foreign investors and local banks continued to increase bets on the notes. The attraction for foreign portfolio investors is elevated yields on Nigeria’s US dollar bonds, analysts told MarketForces Africa, saying the country has never defaulted in repayment.
While this is noted to be relevant in the competitiveness of the asset, elevated yields at the local and foreign markets have also been considered unsustainable.
Nigeria offered 10-year Eurobonds at 10.375% at the latest auction versus 10-year US. Treasury benchmark yield of about 4.3% Some investment analysts see it as a market anomaly facing heavily indebted African countries but quickly add that rate pricing often reflects underlie market expectations.
In Nigeria’s sovereign Eurobonds market, buy pressure across the short, mid, and long segments of the yield curve resulted in a 0.09% decrease in the average yield, bringing it to 9.46%, said Cowry Asset Limited in a note.
Analysts said buying interest remained strong across the benchmark curve, with significant volume at the mid to long ends of the curve. Notably, the Jan-31 maturity recorded the most significant drop in yield, falling by 12 bps, TrustBanc Financial Group said in a note.
The Eurobond market saw significant bullish activity, with Nigeria and Angola leading the way. Nigeria continued to attract investors for its newly issued 6.5 and 10-year Eurobonds.
Angola’s positive performance was bolstered by U.S. President Biden’s $600 million investment pledge at the Global Infrastructure and Investment Summit, indicating enhanced international support for its development projects.
Elsewhere, US Fed Chair Powell noted the American economy’s strength, allowing for cautious rate cuts — decisions based on current conditions rather than tariff uncertainties.
In the foreign exchange market, the naira traded steady, closing at N1,672.69 per dollar in the official market, reflecting no change from the previous rate. Meanwhile, in the parallel market, it ended the day at N1,689 per dollar.
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